Chinese copper smelters have reached a surprising agreement with Chilean miner Antofagasta, settling on a processing fee of $0, marking a record low in the industry. This decision comes at a challenging time for the smelters, who have been grappling with financial losses.
According to multiple sources familiar with the matter, Antofagasta has set the processing fees at $0 per metric ton and 0 cents per pound. This agreement is particularly noteworthy, as smelters are currently facing a shortage of copper concentrate, essential for producing metal in high demand for clean energy transitions, such as electric vehicles and power infrastructure.
The fees established with Antofagasta serve as a benchmark in the industry, contrasting sharply with the 2025 annual charges, which were set at $21.25 per ton and 2.125 cents per pound in previous agreements between the Chilean company and Chinese smelters. One smelter and two analysts described the outcome as “better than expected.”
The zero processing fee represents a significant development for smelters, especially considering current market conditions where spot charges are around negative $43, meaning smelters may face paying miners for processing their concentrate.
Traditionally, copper miners financially compensate smelters for converting copper concentrate into refined metal. This year’s supply shortage stems from the introduction of new smelter capacities in China combined with slower-than-anticipated supply growth.
For instance, Ivanhoe Mines recently reduced its output expectations due to seismic activity affecting its operations in the Democratic Republic of Congo. Analysts project a growing global supply deficit for copper concentrate, with estimates at 1.1 million tons by 2025 and escalating to 2.6 million tons by 2026.
The low fees may exacerbate losses for Chinese smelters, which are the largest refined copper producers and consumers in the world, as processing fees are a vital source of income. There is a possibility that these conditions could lead to some smelters reducing production in the future.
However, so far, Chinese smelters have not significantly decreased output, as revenues from byproducts like gold, silver, and sulfuric acid help mitigate losses from copper production. Recent official data indicates that China’s refined copper output surged by 8% year-on-year to a record 6.05 million tons from January to May, with predictions for total output in 2025 climbing to 13.29 million tons, a 12% increase from the previous year.