Copper Supply Chain Fragility Threatens Industry Progress
The International Energy Agency's (IEA) Global Critical Minerals Outlook 2026 has provided some relief for copper supply, narrowing the projected 2035 gap from around 30% to about 25%. This reduction is largely due to expansions and life extensions of existing mines, such as Kisanfu, Lumwana, Highland Valley, and Antamina. These projects are considered good news, but they also signify that the industry is relying on drawn-down savings rather than increasing production.
The IEA has left out Resolution Copper in Arizona from its forecast due to ongoing litigation, which highlights the need for genuine new supply. The industry's focus should be on resolving obstacles to developing these deposits and bringing them online, rather than just relying on existing resources. However, a critical issue lies in the copper smelting process, where nearly every tonne of primary copper passes through.
The smelter is a choke point that is breaking down financially and physically. The benchmark fee to process a tonne of concentrate has settled at zero dollars, the lowest ever agreed, while spot fees have been negative since 2024. China dominates global copper smelting capacity, lifting its share from around 15% to roughly half.
Many smelters outside of China are running below 70% capacity, relying on selling byproducts like gold, silver, and sulfuric acid. If these prices drop, these smelters will be at risk of closing. The furnaces are also physically breaking down due to aging equipment, with some outages being ordinary maintenance while others may be a result of the financial strain.
One recent example is Zambia, which suspended its 10% duty on exports of raw copper concentrate due to its own smelters being down for extended maintenance. This highlights the fragility of the supply chain and the need for processing copper at home to capture value. To protect this progress, a new approach is needed, recovering copper through new leaching methods that can bypass the strained smelter process.