Copper smelters are facing a new squeeze, unveiling the changing nature of copper smelters. Treatment and refining charges (TC/RCs) have declined sharply amid tightening concentrate supply and increasing smelter capacity build. Cost pressures remain elevated given inflationary trends. On the surface, margins are compressing. However, a closer look reveals a more nuanced outcome – although copper cash costs rose, higher gold and silver prices, sulphuric acid prices, energy credits, and other revenues drove copper net cash costs down. Not only does this partly explain why copper smelters are not closing, it starkly challenges conventional wisdom that treatment charges alone are a litmus test for smelter economic health.
Are copper smelters under pressure?
The copper smelting industry has experienced a period of significant capacity growth, most of which comes from Chinese investments. Our Copper Concentrate Service shows this growth in capacity has well-outpaced availability of concentrate, and consequently utilisation rates have decreased to historical lows. This has resulted in a seller’s market and driven treatment charges to never-before-seen levels, with spot well-below 0.
Meanwhile, inflationary pressures have resulted in operating costs increasing.
The convergence of worsening terms and increasing costs signals to both industry and market that the situation is unsustainable. On the surface, this is true. However, further analysis of the cost and revenue data for smelter operations shows a surprising result – copper net cash costs (after by-products and energy credits) have decreased over the same period, resulting in operating cash margins remaining relatively stable.
Whether copper smelters are under pressure depends heavily on the smelter. As shown above, the industry is not uniformly stressed, but it is also not uniformly comfortable. For well-capitalised, modern operations (those with high precious metal recovery rates, efficient sulphuric acid offtake arrangements, and access to sufficient concentrate sources) the revenue mix has shifted more than the margins have. These facilities were already capturing significant free metal and by-product revenue. The current environment has simply made explicit what was always their structural advantage. For them, the TC collapse has been painful on paper but manageable in practice.
The picture is considerably darker for smelters with older infrastructure, higher fixed cost bases, or geographic disadvantages in acid placement. These operations were disproportionately reliant on TC income precisely because their metallurgical recovery and by-product economics were weaker.
What is helping the smelter industry survive?
Smelters are increasingly becoming indirect beneficiaries of market rallies in precious metals and sulphuric acid.
In 2018, TC revenue still accounted for 39% of total smelter income. By 2025, this picture had inverted almost completely. Free metal now commands 50–53% of total revenue, and by-product credits (predominantly sulphuric acid) contribute a further 25–27%. The speed of this rotation is what demands attention. The shift from a TC-anchored revenue base to one dominated by free metal and acid credits has effectively been completed within three years.
A more uncomfortable observation is that this survival has been partly circumstantial. Free metal revenue has been sustained by elevated copper and precious metal prices – conditions that reflect a constructive macro environment rather than anything smelters themselves have engineered.
However, what the proportional shift does genuinely reflect is a change where smelter value creation now lives. Operations that have invested in recovery efficiency, precious metal capture, and reliable acid offtake infrastructure are not merely benefiting from favourable markets. They have repositioned themselves to extract maximum value from a revenue structure that now rewards metallurgical performance over commercial negotiation.
Between 2023 and April 2026, gold and silver have moved from a steady recovery into a powerful bull cycle. Indexed to 100 in 2023, gold has risen to 257, while silver has outperformed, reaching 308 over the same period. The stronger move in silver reflects its more reactive nature and its dual industrial and monetary role, with gains accelerating as the rally broadened beyond safe-haven demand. While gold’s advance has been driven primarily by macro and policy-related factors, silver’s stronger performance highlights the additional contribution from tightening physical market dynamics.
Our base case remains constructive for both metals, although the drivers and near-term dynamics differ.
Gold continues to be underpinned by structural drivers. These include fiscal deterioration, sustained central bank demand, and persistent macro uncertainty. While periods of liquidity-driven selling are likely – particularly during episodes of market stress – these are expected to be temporary rather than trend-defining.
As a result, gold is expected to remain elevated and trade well above historical norms. At these levels, the yellow metal increasingly reflects a broader repricing of financial risk rather than purely cyclical macro conditions.
Silver, by contrast, is likely to be more volatile and follow a less linear path. After a strong rally in 2025 and early 2026, the market is expected to consolidate at higher price levels. A significant share of investment demand has already been pulled forward, leaving it more exposed to near-term fatigue.
At the same time, the market is tightening rather than expanding. Both supply and industrial demand are contracting, with supply declining slightly faster. This keeps the market in deficit, but with limited flexibility on either side. As a result, above-ground inventories and investor positioning become the key swing factors, amplifying volatility.
Taken together, the outlook suggests that by-product credits are likely to remain elevated over the near- to medium-term, providing smelters with an additional level of margin support and diversification.
In addition to precious metals, sulphuric acid has become a significant contributor to the bottom line. With sulphur shipments from the Middle East impacted since late February, acid prices continued to rally, although varying by region. Domestic Chinese prices reached their highest level since 2021 at $150/t in late January 2026, while international FOB prices are at their highest since 2022. However, acid affordability, relative to downstream markets, has shown mixed signals, with DAP affordability notably deteriorating in early 2026.
We expect prices to decline in 2026 H2 as supply returns to the market. Chinese export restrictions end in April 2026 and there will be new capacity coming online in Indonesia and India. Looking beyond the near term, we anticipate a new cycle of more abundant supply to pressure prices.
More detailed analysis of gold and silver market dynamics, along with our latest price forecasts, can be accessed by CRU subscribers to the Precious Metals Service, if interested request a demo here. Likewise, see our coverage of sulphuric acid market dynamics and request a demo for our sulphur services here.
Will the shift in smelter economics last?
The structural case for a prolonged low-TC environment is strong. Global smelting capacity continues to expand, led by China and increasingly by Indonesia and India, while the pipeline of new concentrate supply remains constrained by permitting timelines, capital discipline, and geopolitical friction in key producing jurisdictions. Unless a meaningful volume of new, high-grade concentrate supply enters the market – or a wave of smelter closures rebalances the system – the conditions that collapsed TCs are not going away.
What is less certain is whether free metal and acid credits can sustain their current contribution levels. Free metal revenue at 18–19 c/lb Cu assumes both strong metal prices and healthy payability terms – neither of which is guaranteed across a cycle. Acid markets, while structurally tighter than a decade ago, remain subject to supply-side shocks. A slowdown in global fertiliser consumption or a significant increase in sulphur supply could erode this revenue line meaningfully.
The 2025 and 2026 figures – showing total revenues of 37.4 and 36.8 c/lb respectively – may therefore represent something close to a ceiling under the current conditions rather than a stable floor. If copper prices soften materially, or acid markets ease further, the total revenue line that has held steady through the TC collapse could begin to compress – and the industry's more vulnerable smelters would feel it quickly.
Smelter economics have changed and significant value is being derived from concentrate composition itself
Copper smelters are operating in a challenging environment, with traditional revenue streams under pressure and costs remaining elevated. On the surface, the outlook for margins appears weak. However, this view misses an increasingly important part of the equation – by-products.
While miners continue to benefit from tighter concentrate markets, smelters are finding support in an unexpected place.
Rising gold, silver and sulphuric acid prices are providing a meaningful offset. At current price levels, this uplift is large enough to materially reshape smelter economics. Looking ahead, many of these commodities will remain elevated in price. Miners have a significant cut from gold, silver and copper but when it comes to sulphur there is none – is it time for commercial terms for the latter?
By-products and free metal are now the backbone of smelter economics
The copper smelting industry is undergoing a fundamental and largely unrecognised structural shift. Treatment and refining charges – long treated as the primary barometer of smelter health – have collapsed to historic lows as global smelting capacity, led by China, has expanded far ahead of available concentrate supply. Simultaneously, operating costs have risen. By conventional metrics, margins should be deteriorating sharply. Yet, the data tells a different story.
The message is clear – TC benchmarks alone are no longer a reliable indicator of smelter economic health. Without accounting for by-product economics, any assessment of smelter competitiveness, credit risk, investment viability, or commercial strategy is incomplete and risks drawing the wrong conclusions.
CRU’s Copper Smelter Asset Service provides the granular, asset-level cost and revenue data needed to cut through this complexity. For those navigating concentrate supply decisions, this is the analytical foundation that ensures your decisions are grounded in the full economic picture, not a partial one. Request a demo here.
