Copper treatment charges have collapsed, but Chinese smelters are still producing. The reason is increasingly found in the by-products: sulfuric acid, gold and silver are helping replace a processing margin that has effectively disappeared.
Spot copper concentrate treatment charges have gone deeply negative in 2026, and the annual benchmark has fallen to zero. Smelters, normally paid by miners to turn concentrate into metal, are now effectively giving value back. The core processing business is loss making.
Yet Chinese refined copper output still rose about 7% year on year in the first four months. Smelters kept running because the concentrate charge is no longer where the money is. It now comes from by-products like sulfuric acid, gold and silver, and from the free metal recovered beyond the contractual payable amount.
Acid is what changed the picture. Every tonne of copper yields three to four tonnes of it, most captured from the concentrate itself. For years it was an afterthought, barely worth transporting. This year its price jumped, and at many Chinese smelters acid revenue now covers much or all of the loss on processing fees.
The rally started before the Middle East conflict, on battery and fertilizer demand and tighter Russian sulfur. Disruption through the Strait of Hormuz, a region supplying much of the world's sulfur, then accelerated it. The link to copper is indirect but real: Gulf sulfur helps set the price of acid, and acid can now determine the margin of the smelter.
So copper output now turns partly on a by-product, priced by sulfur, fertilizer demand and export policy rather than by copper itself.
The mine used to pay the smelter.
This year, the acid does.
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.