Operational Excellence (OPEX) Insight – Thursday - June 04, 2026: When Smelters Must Pay Miners: The 2026 Copper Crisis.
Góc Nhìn Vận Hành Xuất Sắc – Thứ Năm, Ngày 04/06/2026: Khi Nhà Máy Phải Trả Tiền Cho Thợ Mỏ: Khủng Hoảng Đồng 2026.
Welcome To Operational Excellence (OPEX) Insight Article For The Paid Subscriber-Only Edition.
This is the bilingual post in English and Vietnamese. Vietnamese is below.
Đây là bài viết song ngữ Anh-Việt. Tiếng Việt ở bên dưới.
English
PART 1 – OFFICIAL INFORMATION
Throughout the history of the copper mining and smelting industry, the financial relationship between mining companies (miners) and smelters has always operated according to one immutable principle: mining companies extract copper concentrate, transport it to smelters, and pay smelters a fee called Treatment and Refining Charges (abbreviated as TC/RC) for the smelter to process the concentrate into refined copper with 99.99% purity. TC is calculated in dollars per tonne of concentrate, RC is calculated in cents per pound of refined copper. This model has existed for decades and has been regarded as the economic foundation of the entire global copper value chain. In 2026, that model was completely reversed.
In January 2026, the annual TC/RC benchmark established through negotiations between the Chilean mining group Antofagasta and major Chinese smelters fell to 0 dollars per tonne and 0 cents per pound, the lowest level ever agreed upon in the history of TC/RC negotiations. Just one year earlier, the benchmark for 2025 was $21.25 per tonne TC and 2.125 cents per pound RC. The decline from $21.25 to $0 within 12 months was already an unprecedented shock. But the spot market went even further: in Q1 2026, spot TC/RC fell to negative $66.40 per tonne, meaning smelters not only received no processing fee, but had to pay mining companies just for the right to purchase copper concentrate to process. This was the first time in the history of the copper smelting industry that the cash flow completely reversed: smelters paying miners instead of miners paying smelters.
The direct cause of this reversal was a structural imbalance between smelting capacity and concentrate supply. China, which accounts for over 50% of global copper smelting capacity, had been continuously building new smelters throughout the past decade. The total primary smelting capacity of the CSPT (China Smelters Purchase Team), comprising China’s largest smelters, reached 9.10 million tonnes per year in 2025 and was projected to increase to 9.61 million tonnes per year in 2026 following the commissioning of the Chifeng Jinjian II plant (capacity 300,000 tonnes per year) and the completion of the Jinguan plant ramp-up phase. Meanwhile, global copper concentrate mine output increased by only approximately 1.4% (equivalent to roughly 500,000 tonnes) in 2026, according to estimates from the International Copper Study Group (abbreviated as ICSG). The result was dozens of smelters competing for a nearly stagnant supply of concentrate, pushing concentrate prices up and processing fees below zero.
But the supply-demand imbalance in copper concentrate was not the sole factor creating the crisis. Two consecutive geopolitical shocks transformed a structural problem into a comprehensive crisis. The first shock occurred on February 28, 2026, when the Strait of Hormuz was blockaded due to military conflict between the United States, Israel, and Iran. Before the blockade, the Strait of Hormuz was a maritime route carrying 25% of global seaborne oil and 20% of liquefied natural gas (LNG). But few realized that Middle Eastern oil refineries also produce 70% of the world’s elemental sulfur, the raw material for producing sulfuric acid, an essential chemical in the hydrometallurgical copper leaching process. Approximately 20% of global copper production depends on hydrometallurgical processes that consume more than 1 tonne of sulfuric acid for every tonne of copper produced. When the Strait of Hormuz was blockaded, approximately 50% of global seaborne sulfur supply was cut off, and spot sulfuric acid prices tripled in some markets.
The second shock came from China. On May 1, 2026, China officially banned sulfuric acid exports, a by-product of pyrometallurgical copper smelting. China is the world’s largest sulfuric acid producer, accounting for over 40% of global output, and in 2025 had exported a record 4.65 million tonnes. The ban was expected to last through the end of 2026. When sulfuric acid supply from the Middle East (via the Strait of Hormuz) and from China (via the export ban) was simultaneously cut, copper mines in Chile, Peru, the Democratic Republic of Congo, Zambia, and Indonesia that depended on imported sulfuric acid for hydrometallurgical processes were all directly affected, creating additional pressure on an already deficit refined copper supply.
The consequences on the copper price market were immediate and dramatic. Copper prices on the London Metal Exchange (abbreviated as LME) reached an all-time high of $14,527.50 per tonne on January 29, 2026. As of June 2, 2026, LME spot copper prices remained at $13,965.50 per tonne. J.P. Morgan Global Research forecast an average copper price of $12,075 per tonne for the full year 2026 and projected that the United States would face a deficit of 330,000 tonnes of refined copper. ICSG forecast a global refined copper market deficit of approximately 150,000 tonnes in 2026. This was not a temporary price fever driven by speculation. This was the result of a structural shift in the global copper supply chain, where demand exceeds supply at every link, from concentrate to processing chemicals to the final refined product.
