China ‘firmly opposes’ negative copper treatment charges

China “firmly opposes” zero or negative processing fees for copper smelters and is urging the global industry to confront a “structural contradiction” that has upended the market for the industrial metal.

Treatment and refining charges – the fees earned by smelters for processing ore into metal – have plunged to record lows this year due to a scarcity of raw materials. Rapid growth in China’s smelting capacity, by far the world’s largest, has collided with a series of mine outages around the world.

A negative TC/RC effectively means that a smelter is paying to process copper concentrate – a highly unusual situation that has called into question the long-standing industry pricing benchmark. Spot charges have fallen as low as minus $60 per ton this year.

“Such practices severely undermine the interests of the global copper smelting industry, including China,” Chen Xuesen, vice president of the China Nonferrous Metals Industry Association, said in a presentation to an industry conference in Shanghai on Wednesday.

“CNIA firmly opposes any zero or negative TC/RCs in processing of copper concentrate,” he said. “We urge the global copper industry to confront this unsustainable structural contradiction and foster collaboration among relevant nations and stakeholders.”

The low fees have impacted copper smelters worldwide. Japan’s JX Advanced Metals Co. this year announced an output cut running into the tens of thousands of tons, while Glencore Plc received a government bailout to keep its Mount Isa smelter and refinery in Australia running for another three years.

Chinese smelters also suffer from low TC/RCs – but they benefit from their ownership of some mines, as well as the surging price of refined copper and sulfuric acid, a byproduct. Copper prices rose to a record high above $11,200 in late October.

China is taking steps to manage its copper smelting capacity, drawing on its similar experiences with aluminum, Chen said. The country has already curbed over-expansion by halting some 2 million tons of illegal capacity that was either under construction or in planning, he said.

In the coming years, China will also favor new smelting capacity that would run on scrap rather than imported copper concentrate. “We will be able to see the effects from the copper supply-side reform in two to three years,” Chen said.

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