A paradox is unfolding in the copper market, Chile’s main export. Due to the high price of the metal and strong demand from smelters—particularly in China—less refined copper products, such as concentrates, are currently generating higher returns for mining companies than value-added products such as copper cathodes.
This situation is explained by the different costs associated with each stage of the value chain, along with global overcapacity in smelting. “The copper business shows higher margins at the mining stage than in subsequent processing stages. Concentrate production is currently a business with attractive returns, while smelting and refining are industrial activities with much narrower, and even negative, margins—especially considering current treatment and refining charges, which are in negative territory,” explains Juan Carlos Guajardo, Executive Director of Plusmining.
This is compounded by “the global smelting overcapacity, which has led many smelters to accept very low charges in order to secure volumes and maintain operational continuity, given that operating a smelter involves high fixed costs.”
The large number of smelters competing for copper supply has resulted, in some cases, in negative charges for metallurgical facilities. “Smelters are operating with significant excess capacity. In other words, there are far more smelters than concentrates. When copper concentrate—and copper in general—becomes scarcer, smelters reduce treatment charges, which are what they charge mines to process their concentrate, and last year we even reached negative levels. This means that mines selling concentrate not only earned revenue from the copper content, but smelters actually paid them to deliver copper,” says Juan Ignacio Guzmán, CEO of GEM Mining Consulting.
Production declines in Chile
While copper prices have increased, global production of the metal has remained relatively stable and, in the case of Chile, has even declined. According to the latest information published by the Chilean Copper Commission (Cochilco), as of November 2025 copper production totaled 4.87 million tonnes. In the same period of 2024, production reached 4.94 million tonnes, representing a decline of 1.3%.
At the same time, copper surpassed the US$6 per pound threshold for the first time last week. So far in 2026, the average price of the metal has reached US$5.88 per pound. “The week highlighted a copper market that is particularly sensitive to any signal of immediate scarcity and to changes in trade expectations,” Cochilco commented last Friday.
Tightness set to continue
In the coming years, tightness in the smelting market is expected to persist. “Currently, global smelting capacity is around 30 million tonnes, of which 14 million tonnes are located in China, representing 47% of global supply. By 2040, smelting capacity is expected to increase by 10 million tonnes, of which 3 million tonnes will be added in China,” notes Álvaro Merino, Executive Director of Núcleo Minero.
In this context, he points out that since 2019 there has been a global deficit of concentrates, as smelting treatment capacity has grown at a “much faster pace” than concentrate production. “In fact, in 2024 a concentrate deficit of 300 thousand tonnes was recorded, which increased to 450 thousand tonnes in 2025. However, in the coming years this deficit will increase substantially due to additional smelting capacity, particularly in China and India, meaning that treatment and refining charges will remain low,” Merino explains.
Despite the profitability challenges faced by smelters, experts emphasize that there are strategic reasons to maintain processing capacity in Chile. “There are also strategic considerations for having smelting capacity. As has become evident in the context of potential tariff impositions in the United States, having local processing capacity can be relevant to secure supply chains and reduce geopolitical risks,” concludes Guajardo.
Source: El Mercurio