A deepening commercial dispute between Canada’s Teck Resources Ltd. and Japan’s Sumitomo Metal Mining Co. has brought renewed attention to mounting tensions within the global copper market and raised broader questions about the sustainability of the industry’s decades-old pricing model. According to people familiar with the matter, Teck and Sumitomo have failed to reach agreement on the terms for a key copper concentrate supply contract scheduled for this year. The disagreement centers on how to price the treatment and refining charges (TC/RCs) deducted from the value of the concentrates that Teck supplies to Sumitomo’s smelter in Japan.

As the two parties remain at odds, lawyers have been appointed to help identify a neutral industry expert who would serve as an independent referee. This expert would be tasked with determining a fair TC/RC value to resolve the dispute without the need for formal arbitration proceedings. Both Teck and Sumitomo declined to comment on the ongoing negotiations.

Benchmark System Faces Scrutiny

The dispute marks a significant flashpoint in an industry long reliant on a single, annual benchmark system for TC/RCs — the fees paid by miners to smelters to convert copper ore into finished metal. The current benchmark, typically agreed upon at the start of each calendar year, influences the bulk of global copper concentrate trade and has been a cornerstone of pricing stability for decades. This year’s benchmark, set late last year through a deal between Chile’s Antofagasta Plc and several major Chinese smelters, was pegged at $21.25 per dry metric ton of ore processed, and 2.125 cents per pound of refined copper produced. That agreement has been widely adopted in commercial contracts across the industry.

However, according to multiple sources familiar with the negotiations, Antofagasta also struck additional contracts with Japanese buyers at higher rates — approximately $25 per ton and 2.5 cents per pound. These side agreements have led to resistance from some smelters, including Sumitomo, to using the lower $21.25/2.125 benchmark in their own supply contracts. The disagreement has reignited long-running debates over the fairness and consistency of the benchmark model, particularly in a market that is currently experiencing both a surge in smelting capacity and a tight supply of raw copper ores.

Falling Fees and Market Fragmentation

TC/RCs have been under sustained pressure over the past year. A surge in global smelting capacity — driven in large part by China’s rapid industrial expansion — has intensified competition for available copper concentrates. As a result, benchmark fees have dropped to record lows, squeezing the margins of smelters worldwide.

In the spot market, the decline has been even more pronounced. Spot TC/RCs have reportedly turned negative in some cases, meaning that smelters are now paying miners to access concentrates, rather than being compensated for processing them.

The trend mirrors earlier transformations in other commodity markets. In the iron ore sector, for instance, the traditional annual benchmark system was scrapped in favor of more flexible, spot-linked contracts over a decade ago. Some copper miners have pushed for a similar shift, but smelters — particularly those outside China — have resisted such changes due to already-narrow profit margins and heightened financial risk.

A Divide Between Chinese and Global Smelters

The current standoff between Teck and Sumitomo also highlights growing structural differences between Chinese smelters and their global counterparts. Chinese facilities — many of which are state-owned and supported by central or provincial governments — are generally more modern, more efficient, and more financially resilient than their peers in the West and other parts of Asia.

While TC/RCs have plummeted, China has continued to import copper concentrates at record volumes, churning out historically high levels of refined copper. By contrast, smelters in countries such as the Philippines and Namibia have been forced to shut down or mothball operations, and others across the Western hemisphere have begun curbing output in response to the cost pressures.

Japanese smelters, including Sumitomo, may be better positioned than some other non-Chinese operators, owing to long-term strategies aimed at securing supply. Over the past two decades, Japanese firms have invested billions of dollars in upstream mining projects, securing equity stakes and long-term offtake agreements with major producers. Still, the current dispute with Teck suggests that even these protections are not enough to shield smelters from the impact of collapsing fees and growing pricing uncertainty.

Dispute Centers on Quebrada Blanca and Highland Valley Supplies

At the center of the Teck-Sumitomo dispute are supply agreements tied to two specific mining operations: the Quebrada Blanca mine in northern Chile and the Highland Valley mine in British Columbia, Canada. Quebrada Blanca, operated by Teck, is one of the largest copper development projects globally. Sumitomo Metal Mining and its parent company, Sumitomo Corporation, together hold a 30% stake in the operation under a long-term partnership. The terms of the offtake agreement associated with that stake are now part of the dispute, with both sides unable to agree on the appropriate TC/RCs to apply.

In addition, talks are ongoing over the pricing terms for copper concentrates produced at Highland Valley, another Teck-run operation supplying material to Sumitomo’s smelting facilities. Executives from both companies are currently seeking a negotiated settlement with assistance from an independent industry expert, rather than escalating the matter to a formal arbitration process.

Industry Impact

The outcome of this dispute may have broader implications for how copper concentrate is priced in the years to come. With growing dissatisfaction over the benchmark model and increasing fragmentation in the market, some analysts believe the system may eventually give way to a more dynamic and market-linked approach — though the transition would likely be uneven and fraught with tension. For now, the case underscores the challenges facing smelters in an increasingly competitive and imbalanced market. With benchmark fees falling, supply remaining tight, and cost pressures rising, the copper industry may be approaching a breaking point in how it prices one of its most essential supply relationships.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.