Antofagasta offers Chinese smelters negative processing fees as talks start

Chilean copper miner Antofagasta Plc has proposed negative treatment charges for sales to Chinese smelters amid a global squeeze on supplies of ore, according to people familiar with the negotiation.

Antofagasta made an initial offer this week at a treatment charge of -$15 a ton for supplies to Chinese clients, the people said, asking not to be identified discussing a sensitive commercial matter. The number was first reported by Mysteel Global.

While individual cargoes of semi-processed copper ore, known as concentrates, have been trading at negative levels for more than a year, long-term contracts have until now remained positive.

The sharp decline in processing fees, known as treatment and refining charges or TC/RCs, comes as a rapid expansion in global smelting capacity has outstripped the growth in mine production.

Negative TC/RCs mean smelters are effectively paying more for the copper ore they are buying than the value of the copper it contains. They can still make money through sales of byproducts, like sulphuric acid and precious metals.

A further drop in long-term contract prices would deal a major blow to copper smelters, as treatment charges traditionally account for about a third of their revenues. Chinese smelters process about half of the world’s copper after years of rapid expansion and are the biggest buyers of concentrate.

The ongoing discussion covers Antofagasta’s supply over different periods, ranging from second half this year to the first half of next year, the people said.

Last June, the parties agreed on treatment charge of $23.25 a ton for the mid-year contract. A few months later, annual supply contract for 2025 was agreed at a record low of $21.25 a ton.

Chinese smelters are yet to respond to the latest proposal, the people said. A representative for Antofagasta didn’t immediately respond to a request for comment.

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