Copper Smelters Pay for Silver-Bearing Ore Amid Global Shortage
Copper smelters in China have been effectively paying miners over $230 a tonne for silver-bearing ore as of September. This unusual situation arises not due to a copper shortage but because of a scarcity of ore that contains silver. The ore in question, called concentrate, is the form of copper output that also carries silver. When the treatment charge, a fee smelters typically earn for processing ore, falls below zero, it indicates intense competition among smelters for the limited supply of concentrate.
The scarcity of silver-bearing ore is driven by a decline in production from mines that supply more than a quarter of the world's mined silver. This reduction is primarily due to size constraints at these mines. On an estimate, the silver at stake amounts to roughly a quarter of this year's forecast deficit, though this figure decreased with July's data. Silver's price has faced pressure from rising interest rates, trading at $61.14 an ounce on October 6, down from its January high. The Federal Reserve's rate hike on September 16 and climbing long-term yields have added to this pressure.
The shortage is particularly notable because most of the world's mined copper leaves the mine as concentrate, which smelters process to recover both copper and silver. The Shanghai Metals Market index for treatment charges hit a record low on September 18, falling further to minus $231.68 a tonne by September 30. This negative fee highlights the intense bidding among smelters for the limited available ore. Copper production from concentrate fell by 2% while leached cathode, which does not carry silver, rose by 3.6%. Chile, the largest copper producer, saw an 11.7% drop in mining output in August due to lower ore grades and storm after-effects.
Labour disputes at two large Chilean mines, Escondida and Antofagasta's Centinela, add to the risk of further reducing concentrate output. A strike at either mine could exacerbate the shortage. Copper mines produced 237.3 million ounces of silver in 2025, accounting for 28% of the world's mined silver. The estimated shortfall due to the decline in concentrate production is roughly 4.75 million ounces annually. While refined copper stocks are high, the shortage lies in the ore needed for smelting, not in the finished metal. This situation supports the case that mine supply of silver cannot rise quickly, offering a mild positive outlook for silver investors over the next twelve months.