China's copper smelters are bracing for a historic shift in how they get paid for processing the world's most widely used industrial metal. According to a Reuters poll, most of the country's smelters expect to accept a negative benchmark price in next year's term contracts for the first time, even as they resist abandoning the long-standing treatment and refining charge (TC/RC) system entirely.
The poll of 35 smelters, miners, traders, and analysts found that most respondents expect a negative term number, clustering between minus $50 and minus $150 per metric ton. Only a minority think the benchmark will be replaced completely by spot pricing. The shift reflects a market where copper concentrate—the raw material smelters turn into refined metal—has become scarce, flipping the usual economics so that smelters end up paying miners rather than the other way around.
What are TC/RCs and why do they matter?
Treatment and refining charges are the fees that miners pay smelters to process copper concentrate into refined copper. For years, much of the Asian copper trade has used a twice-yearly reference negotiated between big miners and China's smelters to set these charges. The benchmark has served as a stable, predictable way to price a large portion of the world's copper processing business.
But that system is drifting away from where deals are actually getting done. Spot trades have been negative since early 2025 because concentrate is scarce, meaning smelters are paying miners for the right to process the ore. The Reuters poll suggests that even if the term benchmark settles in the negative range, it would still be far above recent spot levels—minus $247.20 a ton on November 6—keeping incentives for more cargoes to use spot-linked formulas.
This mismatch between the benchmark and spot prices is what analysts call "basis risk." When term contracts price off TC/RCs but cargoes clear far below that in spot, the benchmark and spot can move differently, hurting anyone still contracting or hedging off the reference. Over time, that usually pushes markets toward shorter-dated prices that reset more often and reflect supply and demand in the moment.
Why is copper concentrate so scarce?
The squeeze stems from a combination of mine supply disruptions and expanding smelting capacity, especially in China. Mines have faced operational issues, lower ore grades, and delays in new projects, while Chinese smelters have ramped up capacity to meet the country's massive demand for refined copper. That imbalance has flipped the negotiating power from smelters to miners.
If the squeeze persists, the benchmark can survive on paper while becoming less representative. Argus, a commodities price-reporting agency, quoted analyst Raghav Jain saying that mismatch could be especially clear by 2027. That timeline suggests the industry may be in for a prolonged period of adjustment.
What it means for investors
For everyday investors, the immediate impact is indirect but worth understanding. Copper is a bellwether for global economic health, used in everything from construction to electric vehicles. A negative TC/RC benchmark signals that copper concentrate is tight, which can eventually feed into higher refined copper prices—good news for miners, but a cost pressure for smelters and, ultimately, for manufacturers.
But the bigger story is the evolution of pricing itself. The move away from a fixed benchmark toward more spot-linked pricing is reminiscent of what happened in the iron ore market after 2010, when annual pricing gave way to quarterly and then spot-based contracts. Copper concentrate pricing could follow a similar path: a benchmark that's still quoted, but with less value for risk management and more frequent repricing pressure in Asian supply contracts.
For investors holding copper-related stocks or funds, this shift could increase volatility in earnings, as smelters' margins become more exposed to short-term market swings. It also highlights the strategic importance of securing concentrate supply, which could favor miners with diversified operations over those reliant on spot purchases.
In the near term, a minus $50 term benchmark won't matter much if spot stays near minus $247. The gap between the two will be the key number to watch. If spot prices recover, the benchmark could regain relevance; if they stay deeply negative, the industry may accelerate toward a new pricing model.
As the copper market navigates this transition, investors should keep an eye on how smelters and miners adapt. The outcome will shape not only the copper supply chain but also the broader metals complex, which has already seen copper prices tumble in recent sessions. And with analysts like Goldman Sachs trimming their 2027 copper outlook on AI positioning risk, the metal's path remains uncertain.
