Copper prices are getting the attention, but the real strain is showing up further down the chain. With treatment charges at zero and smelter margins under pressure, refined supply may be less secure than the headline price suggests.
Originally published on LinkedIn (opens in a new tab), 10 June 2026.
Copper smelters are supposed to be paid by miners to process concentrate into metal. For 2026, that margin has effectively disappeared.
Antofagasta and a Chinese smelter agreed the annual benchmark treatment and refining charges at $0/t and 0c/lb. Last year’s benchmark was $21.25/t and 2.125c/lb, already a record low. In the spot market, charges have been negative at points, meaning some smelters have effectively been paying for the right to process concentrate.
The reason is straightforward: supply and demand. China has added smelting capacity faster than the world has added mine supply. At the same time, disruptions at Grasberg and Kamoa-Kakula, along with the continued shutdown of Cobre Panama, have kept concentrate availability tight. The result is too many furnaces competing for too little feed. That matters because the copper price alone does not show the pressure building underneath the market.
LME copper near recent highs reflects demand expectations, tight inventories, electrification, data centres and grid investment (the broader “copper is the new oil” argument). Smelter economics are under severe pressure, and if that pressure persists, refined supply becomes harder to take for granted.
This is the part of the copper story that gets less attention and most bullish copper arguments focus on mines, demand and long-term deficits. Those are very important, but between the mine and the cathode sits the smelter, and right now that part of the chain is under serious pressure.
Treatment charges, concentrate availability, smelter utilisation and cathode premiums may matter just as much over the next phase of the cycle.
The threat of a US tariff on refined copper has already pulled an extraordinary amount of metal into American warehouses. No tariff has been imposed, but the uncertainty itself has created something close to a privately funded strategic stockpile.
VLCC volumes fell as Hormuz disrupted traditional Gulf flows, but longer Atlantic-to-Asia voyages absorbed more vessel time. That has supported freight despite fewer barrels moving — but the effect could unwind quickly if trade routes normalise.
Iran asked ships to pay for passage through Hormuz. Now the US is proposing its own charge for providing security. The bigger concern is not the price, but the precedent: once free transit through an international strait becomes negotiable, the principle itself starts to weaken.