It was like holding up a collapsing tower [SMM Analysis]

On the night of December 19, 2025, leading Chinese smelters completed negotiations that will go down in the history of the copper industry: Chinese smelters and Antofagasta have finalized the copper concentrate TC/RC benchmark for long-term contracts in 2026 at $0/0.0¢. The benchmark for 2025 long-term contracts was set at $21.25/2.125¢.

Since the end of 2023, with the collapse of the fundamental supply and demand dynamics for cu cons, the spot TC for cu cons has also experienced a sharp decline. Spot TC for cu cons fell to a historic low in the mid-negative $40, while annual contract levels dropped to unprecedented lows in the history of the copper smelting industry.

Over the past three years, as China's smelting capacity for primary smelting has been concentratedly commissioned, year-end negotiations between Chinese smelters and Antofagasta have been particularly challenging. Since the end of last month, Antofagasta consistently maintained its Benchmark offer to Chinese smelters in the mid-negative $10 from the first to the second round. During this period, the China Smelters Purchase Team (CSPT) and the China Nonferrous Metals Industry Association repeatedly stated their firm stance: they would not accept any long-term pricing system other than the Benchmark, would not accept a negative Benchmark result, and were determined to reduce primary smelting output. Expectations for production cuts in primary smelting among Chinese copper smelters grew stronger. Facing these difficulties head-on, Chinese smelters, with one leading enterprise arguing forcefully on principle and without conceding on other terms, finally reached a $0 agreement with Antofagasta on the night of December 19, paving the way for other participating Chinese smelters to follow suit. Prior to this, market pessimism was rampant, with bearish narratives circulating widely. Given the mining company's persistent negative offers over multiple rounds, the market generally expected Chinese smelters to reluctantly accept a negative figure, ushering in an era of negative annual contracts. From the outcome, these negotiations were nothing short of turning the tide and preventing a catastrophic collapse.

On September 24, in his concluding remarks, Chen Xuesen, a standing committee member of the Party Committee and Vice President of the China Nonferrous Metals Industry Association, emphasized that the "cutthroat competition" within the copper smelting industry has significantly impacted the sector, harming national and industry interests and deviating from the direction of high-quality development. Enterprises in the copper industry must firmly oppose such "cutthroat competition" and pursue high-quality development. As the call for high-quality development grows louder, SMM believes this will impact China's copper smelting industry in the following ways:

1. The likelihood of potential primary smelting project construction or commissioning is decreasing. Except for projects like the second phase of Chifeng Jintong, the first phase of Jianfa Shenghaike Chemical, and the expansion of Hengbang's main facility, other projects under construction may be put on hold.

2. The growth rate of mined primary copper output (demand for cu cons) from Chinese smelters is expected to marginally decline and is projected to turn negative starting in 2030.

3. The proportion of copper scrap smelting in Chinese copper smelters is expected to increase year by year. Globally, major copper cathode producing countries will shift their focus from competing for cu cons to competing for copper scrap. SMM believes the production cuts expressed by Chinese copper smelters refer not to a reduction in copper cathode output, but to a decrease in primary smelting utilization rates, alongside greater utilization of copper scrap in the smelting process, which aligns with China's environmental policies. Therefore, although total Chinese copper cathode production will continue to increase, its growth rate will marginally decline. Smelters such as Mitsubishi's Onahama plant in Japan, PPC in Japan, and Onsan in South Korea have also publicly stated their intentions to reduce cu cons usage and replace it with copper scrap. It is evident that the competition for cu cons will transition into competition for copper scrap.