It Was Like Turning the Tide When All Hope Seemed Lost [SMM Analysis]

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On the morning of June 27, 2025, China’s leading smelting companies concluded a landmark negotiation that will go down in the history of the copper industry: The mid-year TC/RC settlement between Antofagasta and Chinese smelters was finalized at $0.0/dmt and 0.0 cents/lb.

Since late 2023, with the collapse of copper concentrate supply-demand fundamentals, spot TC rates in the copper concentrate market have also plummeted. Spot treatment charges for copper concentrate have hit a historic low in the mid-negative $40s, while long-term contract rates have also dropped to unprecedented lows for the smelting industry.

Over the past three years, as China’s smelting capacity has been concentrated and ramped up, mid-year and year-end negotiations between Chinese smelters and Antofagasta have become particularly challenging. From the end of last month through three rounds of talks, Antofagasta held firm at a mid-year offer of -$15 to Chinese smelters, refusing to concede even slightly. The mining company bet correctly that Chinese smelters’ production resilience and expectations for output cuts were diminishing, leaving no room for compromise.

However, Chinese smelters rose to the challenge. Thanks to the strong stance of two leading smelters in the negotiations, one of them finally secured a $0 settlement with Antofagasta this morning without conceding on other terms. The rest of the participating Chinese smelters followed suit.

Previously, market pessimism had been rampant, with bearish forecasts and production cut rhetoric dominating discussions. Given Antofagasta’s insistence on a -$15 offer across multiple rounds, many expected Chinese smelters to succumb to negative TCs, ushering in an era of negative long-term contracts. From this perspective, the outcome of this negotiation was nothing short of turning the tide when all hope seemed lost—a last-ditch effort to avert disaster.

A Brief Digression: The Future of Copper Market Trends

Since we’ve just touched on the reduced expectations for Chinese copper smelter cuts, let’s explore the potential trajectory of the copper market:

1. Global Smelter Disruptions Show a Polarized Trend

   • Chinese refined copper production has repeatedly defied rumors of cuts, showing strong resilience and vitality with continuously rising output.

   • In contrast, smelters outside China face growing expectations of production cuts:

     • Glencore’s Mount Isa smelter in Australia is struggling with “unprecedented smelting market conditions,” high energy and labor costs, and feedstock shortages, awaiting government financial aid.

     • India’s Adani smelter, after multiple delays, has lost long-term contracts and is running at low capacity using spot copper concentrate.

     • JX Nippon Mining & Metals is considering output cuts due to declining profitability and worsening feedstock procurement conditions.

     • South Korea’s Onsan smelter faces increasing risks of production cuts.

     • Glencore’s PASAR smelter in the Philippines has already halted operations.

2. U.S. Market Absorbs Global Copper, Deepening LME Backwardation

   • The U.S. continues to siphon global refined copper, intensifying the LME Cash-3M backwardation, which has spiked since last week.

   • This deep backwardation is expected to persist for an extended period.

   • Some Chinese smelters with tolling licenses plan to export refined copper to avoid unfavorable arbitrage, but this will likely be a drop in the bucket.

   • LME inventory drawdowns may outpace China’s warehouse inflows, making it difficult to reverse the poor arbitrage.

   • Regardless of the Section 232 tariff outcome, COMEX’s contango structure will lock in substantial refined copper in the U.S., discouraging any “reflow” of metal to global markets.

3. Potential for SHFE Backwardation in Q4

   • If China’s refined copper stocks continue to deplete due to exports, the SHFE could develop a deep backwardation during the traditional peak consumption season in Q4.

   • Only then might the arbitrage imbalance begin to correct.