Copper Hits Record Highs While Smelters Lose Money on Every Ton

Copper prices have reached record highs, while smelters are struggling to make a profit on each ton of metal produced. This situation highlights the imbalance in control over the world's most important industrial metal. The three-month copper price on the London Metal Exchange peaked at $14,779 a ton earlier this month, marking its fourth consecutive day of gains, before settling closer to $14,630.

In the United States, COMEX copper is trading near $6.75 per pound, driven by the same factors affecting London prices. The 2026 benchmark treatment and refining charge, a fee miners pay to smelters to convert concentrate into finished metal, settled at zero dollars a ton this year, the lowest annual benchmark on record. Spot rates have even dropped to roughly negative $127 a ton, indicating that smelters are effectively paying miners to process their own ore.

China, which accounts for about half of the world's copper production, has expanded smelting capacity by more than 90% since 2005, reinforcing its grip on the processing side of the market. Meanwhile, China's mine supply has failed to keep up with its growing demand for copper. Chile, one of the world's largest copper producers, reported its weakest second-quarter output in at least 19 years, with Antofagasta's first-half production declining by 9.5%.

Cobre Panama mine in Panama remains closed due to a legal dispute with the government. Despite these challenges, new smelting capacity projects are still on the table, with potential additions of over 8 million tons of new smelting capacity by the early 2040s, primarily in Asia. However, the growing presence of tariffs, such as Washington's potential tariff on refined copper imports, is further tightening availability and creating a tighter concentrate market.

The combination of supply constraints, shrinking processing capacity, and trade flow distortions suggests that the multi-year, structural supply gap in copper production is here to stay.