The copper industry is facing a major shift as the traditional benchmark pricing system for copper ores fractures due to an acute shortage. Since the 1980s, an annual negotiation between a leading mining company and a large copper smelter has set a benchmark price used across the market. However, this system is now under strain, with the number of deals linked to the benchmark price falling sharply and expected to drop further next year, according to consultancy CRU Group.
The upheaval affects the pricing of over $200 billion a year in copper ore, known as concentrates. Miners are demanding that fixed-price deals be set close to spot market levels, while smelters warn of deep losses and plan output cuts. The debate over next year’s supply has become so polarized that many in the industry question whether a benchmark deal can be agreed upon. Wood Mackenzie, a key market forecaster, has refrained from predicting next year’s benchmark due to the wide divergence between benchmark and spot conditions.
The shift mirrors a transformation in the iron ore market nearly two decades ago, which delivered significant profits to miners. China, which processes more than half the world’s mined copper, has seen its smelters disadvantaged by scarce ore supplies. Less than 30% of China’s copper concentrates trade is now linked to the benchmark, down from over 50% two years ago, with the ratio expected to dwindle further in 2027. Globally, about 45% of concentrate sales are expected to remain linked to the benchmark.
Japanese smelters are also pushing for fixed-price deals independent of China’s benchmark, leading to commercial disputes. For instance, Canadian miner Teck Resources Ltd. and Japan’s Sumitomo Metal Mining Co. are in arbitration over whether to use a Chinese or Japanese benchmark. The broader discussion centers on concentrate availability relative to smelting capacity, with the industry’s choice to balance these pressures determining the outcome of negotiations.