When Miners Make Concessions: Lundin and PPC's Rare 2026 Processing Fee Stability amid Industry Crisis

The copper smelting industry faces an unprecedented crisis as treatment and refining charges (TC/RCs) have plunged to historically catastrophic levels. Yet amid this turmoil, a noteworthy development has emerged: Pan Pacific Copper has negotiated with Lundin Mining to maintain 2026 processing fees at current levels rather than accepting further reductions. This decision signals a critical shift in how miners and smelters are approaching market pressures.

The Perfect Storm in Copper Smelting Economics

For decades, TC/RCs operated on a predictable principle—they fluctuated with global copper supply dynamics. The mechanism was straightforward: during supply gluts, charges fell; during supply shortages, they rose. This year, however, the industry witnessed something far more alarming: charges not only collapsed to record lows at just US$21.25 per ton and 2.125 cents per pound, but many spot transactions turned decisively negative.

The root cause is geographical imbalance. Chinese refiners have constructed smelting capacity at a pace that vastly outpaces available copper concentrate supply. This overcapacity has created what industry observers describe as a critical threshold scenario. Asian smelters, already operating at razor-thin margins, warn that further compression could force operational shutdowns.

Strategic Convergence: Why Lundin and PPC Differ from Market Expectations

The agreement between these two entities defies broader industry predictions. Most analysts anticipated steeper fee reductions for 2026 as competitive pressures intensified. Instead, Lundin and Pan Pacific Copper chose commercial preservation over pricing aggression.

This choice wasn’t arbitrary. JX Advanced Metals, PPC’s parent company, holds a substantial 30 percent equity stake in Lundin’s Caserones mine in Chile. This ownership structure creates mutual interdependence—both parties benefit more from operational stability than from extracting maximum short-term concessions. When you’re partially invested in your supplier’s mine, collapse becomes mutually destructive.

The broader context matters too. PPC recently announced a strategic consolidation, merging its purchasing and sales functions with Mitsubishi Materials. This restructuring aims to amplify Japan’s collective negotiating leverage in an increasingly strained market. The Lundin accord should be viewed within this repositioning strategy.

Breaking Industry Conventions: Freeport-McMoRan’s Precedent

Pan Pacific Copper’s move follows a significant warning issued by Freeport-McMoRan in October. The mining giant publicly indicated plans to abandon the traditional benchmark-setting system that has governed copper contracts since the 2010s. Freeport framed this departure as necessary to prevent smelter collapse, essentially acknowledging that the existing framework has become economically unsustainable.

The benchmark-setting tradition depended on Chinese smelters anchoring the first major annual deal, establishing a price floor for the entire industry. But as charges approached zero, then turned negative in the spot market, Chinese refiners refused to participate in setting what would be a catastrophic benchmark. The system, in its classical form, has functionally broken down.

China’s Emergency Response and Market Rebalancing

The most acute pressures manifest in China. This year’s negative TC/RCs prompted extraordinary intervention: the China Smelters Purchase Team, representing the nation’s largest refiners, negotiated a dramatic collective output reduction of over 10 percent for next year. According to Shanghai Metals Market data, this coordination included establishing new procurement oversight mechanisms and blacklisting suppliers deemed disruptive.

This represents an unprecedented level of supply-side management—essentially, Chinese smelters are choosing coordinated contraction over competitive destruction.

The Broader Implication: Stability Through Strategic Concessions

The Lundin-PPC arrangement demonstrates that miners with long-term industrial relationships to Japanese smelters recognize a fundamental economic reality: extracting maximum fees from distressed partners destroys long-term value chains. By preserving commercial terms, Lundin Mining prioritizes supply chain integrity over short-term margin optimization.

As 2026 approaches without clarity on where the benchmark will ultimately settle, the industry faces a bifurcated future. Traditional competitor relationships will likely experience continued pricing pressure, while strategically aligned partners—particularly those with integrated ownership structures—may maintain stability. The market enters uncertain territory, with the traditional architecture of copper commerce fundamentally altered.