Record Copper Prices Mask a Global Smelter Crisis

Copper prices have hit record highs on the London Metal Exchange and in the US, but smelters are struggling to make money due to a combination of factors.

The three-month copper price on the LME reached $14,779 per ton on Tuesday, its fourth consecutive day of gains, before easing back to around $14,630. The metal is up nearly 18% this year, but smelters are not benefiting from the surge in prices.

The benchmark treatment and refining charge for 2026 settled at zero dollars per ton this year, the lowest annual benchmark on record. Spot rates have dropped even further, to around negative $127 per ton by mid-year, meaning smelters are effectively paying miners to process their own ore.

This situation is a result of China's control over copper processing and its impact on global supply chains. China has driven more than 90% of global smelting capacity growth since 2005, but it has not invested in sufficient mine supply to meet the growing demand for copper.

Mine output is the actual constraint, not processing capacity. Chile posted its weakest second-quarter output in at least 19 years, while Antofagasta's first-half production fell 9.5%. Disruptions at Kamoa-Kakula and Freeport operations have also contributed to the supply shortage.