Copper Supply Gap Narrowed, but Fragile Due to Smelting Process Breakdown

The International Energy Agency (IEA) has narrowed its projected 2035 copper supply gap from around 30% to about 25%, a significant reduction driven by expansions and life extensions of existing mines. However, this progress is fragile as the smelting process, which captures most of the value in the copper production chain, is breaking down financially and physically.

The benchmark fee to process a tonne of concentrate has settled at zero dollars, the lowest ever agreed, according to the IEA, and spot fees have been negative since 2024. China has built more than 90% of the world's new copper smelting capacity, lifting its share from around 15% to roughly half.

This concentration of capacity in China has led to a situation where smelters outside China are running below 70% of capacity while China's run near 85%. Many stay open only by selling byproducts such as gold, silver, and sulfuric acid. If the prices of these byproducts drop, smelters will be at risk of closing.

In Zambia, one country credited for narrowing the gap, a 10% duty on exports of raw copper concentrate was suspended due to its own smelters being down for extended maintenance. This highlights the problem of relying on a single step in the production chain that is prone to failure.