Copper's Wild Year: Record Highs, a Zero-Dollar Smelting Fee, and the Metal Powering Electrification

Copper has become the year's defining commodity story. The metal crossed $12,000 per tonne for the first time in December 2025, then spiked to a record of roughly $14,527.50 per tonne intraday on the London Metal Exchange on 29 January 2026 — its largest single-day jump since 2008 — before falling back to close near $13,720. The rally is not a speculative blip. It reflects a structural collision between surging demand and a supply chain that cannot keep pace, with one bizarre signal at its centre: miners now pay refiners essentially nothing to turn their ore into metal.

Why copper is the metal of electrification

Copper conducts electricity better than almost any affordable material, which makes it indispensable to every wire, motor, transformer and charging cable in a decarbonising, digitising economy. The intensity is striking. A battery-electric vehicle uses roughly 2.4 times more copper than a combustion car. Power grids are expanding fast, and the International Energy Agency projects copper demand for grid lines alone more than doubling by 2040.

The newest accelerant is artificial intelligence. A single one-gigawatt data centre can consume as much copper as hundreds of thousands of electric cars. BHP chief executive Mike Henry told CNBC in December that copper demand could rise around 70% between now and 2050, even as new deposits get smaller, lower-grade and harder to permit. A Reuters poll of 31 analysts on 29 January put the median 2026 price forecast at $11,975 a tonne — the highest consensus ever recorded.

What TC/RC charges are — and why $0 matters

Here is the technical heart of the story. Mines produce copper concentrate, not finished metal. Smelters do the refining, and they are normally paid for it through treatment and refining charges (TC/RCs) — a fee, set annually as a benchmark, that miners deduct when they sell concentrate. For years that fee was a reliable revenue stream for smelters.

In January 2026 the annual benchmark settled at $0 per tonne, the lowest level ever agreed, down from around $21 in 2025, according to the IEA. Spot charges have been outright negative since 2024. The cause is a shortage of concentrate: too many smelters chasing too little ore. The effect is brutal — smelters now refine copper for free, or pay for the privilege, eroding the economics of the very facilities the world needs to produce more metal. Chinese smelters have agreed to cut output by more than 10% in 2026, and Beijing has halted around 2 million tonnes of planned new smelting capacity.

The China concentration risk

The squeeze exposes a strategic vulnerability. China accounts for around 50% of global copper smelting output, up from roughly 15% two decades ago, and has supplied over 90% of the growth in global smelter capacity since 2005, the IEA notes. That concentration means a single country's policy decisions — production cuts, export rules, capacity approvals — ripple through the entire downstream market. For governments treating copper as a critical material for energy security and defence, the refining bottleneck is as worrying as the mining one.

What to watch: deficits and new mines

The supply gap is the dominant long-term theme. The IEA warns the copper market could face a supply deficit of 30% by 2035 based on the current project pipeline. S&P Global projects demand reaching 42 million tonnes by 2040, a roughly 50% rise, while mine output peaks around 2030 — and in a January study it labelled the shortfall a "systemic risk" to the economy. Mining costs are climbing too: S&P sees total cash costs peaking near $32 per tonne in 2026, though most production still sits comfortably below market prices.

Near-term, analysts disagree on balance — J.P. Morgan models a refined deficit of about 330,000 tonnes in 2026, while others see a small surplus. But the direction of travel is clear. Three forces will decide where copper goes next: how fast electrification and AI demand grow, whether enough new mines and smelters can be financed and permitted, and how China manages its dominant refining position. A $0 smelting fee and a $14,500 price tag are, together, the clearest signal yet that the world's electrified future is bumping against the limits of how much copper it can actually make.