Concentrate supply remains tightest segment of copper value chain: Nornickel

Russian base metals producer Nornickel estimated that the global copper concentrate market will remain undersupplied in 2026, with a deficit of 751,000 metric tons that would keep processors' margins under pressure.

Benchmark concentrate treatment charges for 2026, as part of annual contracts, were set at $0/mt, down from $21/mt in 2025, as smelting capacity continues to compete for scarce concentrate supply, the company said in its June 23 copper market outlook.

The Platts assessment of copper concentrate treatment charge in spot procurements was at minus $125/mt CIF China June 24, having plunged deeper from minus $50/mt in the beginning of January. Platts is part of S&P Global Energy.

The impact of concentrate shortages on refined supply has been limited so far, and adjustments are more likely to take the form of delayed ramp-ups, extended maintenance or selective reductions at assets with little backward integration, Nornickel said.

Also, even when treatment and refining charges are at zero or negative, some smelters are cushioned by auxiliary revenue from by-products like sulfuric acid and precious metals, as well as policy incentives that help plants absorb processing losses and keep operating.

Capacity rationalization was already visible outside China, including Japan, where copper producers were shifting their raw-material mix toward recycled feedstock.

Additional cost pressure

Solvent Extraction and Electrowinning, or SX-EW, copper plants are facing additional cost pressure, Nornickel said. They need to use externally sourced sulfuric acid as a leaching reagent, and after the Middle East war has tripled the price of sulfur to over $1,000/mt, the input has become a cost and availability risk.

Higher acid prices and tighter supply could even constrain cathode output, said Nornickel, adding that the risk is material but concentrated in SX-EW-heavy regions, particularly the Democratic Republic of Congo and Chile. The company estimates that SX-EW capacities accounted for 21% of global copper mine output, or 4.8 million mt, in 2024.

The first adjustment in smelter capacity is more likely to come through tighter procurement, production discipline, delayed ramp-ups and scheduled maintenance rather than broad capacity cuts, but the cost pressures may become more visible in the second half of 2026, given the lag between sulfur supply disruptions and downstream acid availability.

Mine output to grow marginally

Nornickel expects global copper mine production to increase modestly in 2026, to 23.6 million mt, up 1.6% year over year.

Cobre Panama mine remains a structural absence from the concentrate market, with more relevant risks now including slower-than-expected recoveries at Grasberg and Kamoa-Kakula mines, infrastructure and logistics constraints in the DRC, and declining ore grades and operational complexity in Chile and Peru.

The project pipeline, supportive of the medium-term mine supply, is unlikely to ease near-term constraints. New projects are expected to account for only 0.3 million mt of mine production in 2026, with their contribution expanding to 1 million mt in 2027, and to more meaningful tonnage from 2028 onward, according to Nornickel.

Meanwhile, copper demand has remained resilient. Nornickel said that cable and wire producers point to solid order books, indicating that end-users have not significantly reduced purchasing activity despite weak macroeconomic signals and elevated copper prices.

Between now and a year ago, the LME three-month copper price has increased by 38%; it closed at $13,371/mt on June 23, up from $9,670/mt on the same date in 2025.

However, physical demand is well supported by investments in power grids, electrification, renewable energy, battery manufacturing, energy storage and the expansion of data-center infrastructure, which cumulatively offset weakness in China's property sector and European manufacturing.

Moderate surplus

Since its late 2025 outlook, Nornickel has revised its forecast for the refined copper market balance from an expected deficit to a moderate surplus.

For 2026, the balance has been revised from a previously expected deficit of 118,000 mt to a surplus of 250,000 mt, the equivalent of three days of consumption, as refined supply is expected to reach 28.6 million mt, while demand is forecast at 28.3 million mt.

The main reason for the revision is that tight concentrate availability has so far translated into refined production losses more slowly than expected, the company said, adding that supply has also been supported by secondary production from scrap and the ramp-up of recently commissioned smelting and refining capacity.

Nornickel stresses, though, that the apparent surplus is being absorbed by tariff-driven and investment-related inventory accumulation, while the underlying, stock-adjusted refined market looks tight and might even be in deficit.

The company's near-term outlook could be adjusted due to US monetary policy expectations pivoting from anticipating rate cuts to pricing in higher-for-longer rates, as well as potentially longer-than-expected disruptions to Persian Gulf energy flows.

The Middle East conflict has already resulted in higher fuel costs and renewed inflation, but since it has not directly hit copper supply, Nornickel sees it as a short-term macroeconomic risk only as long as the conflict does not lead to a more sustained disruption of energy flows.

Over the medium to long term, Nornickel believes the world copper market remains fundamentally supported by electrification, grid expansion, digital infrastructure, energy security and industrial regionalization.