Hindustan Copper set to benefit as slumping refining charges shift leverage toward mining companies

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Record-low refining charges  are transforming the global copper industry, with mining companies like Hindustan Copper well positioned to benefit from the current dynamics, analysts say. The growing race to secure copper concentrates—hailed as the "new oil"—has triggered a global shortage, shifting  the balance of power toward miners, allowing them to capitalise on their control over raw material supply.

Mining companies pay smelters treatment charges/refining charges (TCs/RCs) to have their semi-processed ore—or concentrate—turned into copper cathodes. TCs/RCs are thus a major source of revenue for smelters.

he TC is the fee for the initial processing of the concentrate into copper metal, while the RC covers the further refining needed to remove impurities and produce high-purity copper. When contracts are made, the price of copper concentrate is typically based on the London Metal Exchange (LME) price, minus the TC/RC charges. For example, if the LME price is $10,000 per tonne and the TC/RC charges are $100 per tonne, the miner (Hindustan Copper) sells the concentrate to the smelter for $9,900 per tonne. These charges help cover the smelting and refining costs and are viewed as a discount.

In 2025, the TC/RCs for copper are expected to be low, with a projected average of $10.70 per tonne, according to Andrew Cole, an analyst with commodity price discovery platform Fastmarkets. This is a significant drop from 2024, when the benchmark was $80 per tonne amid a supply crunch and increased competition from new refiners.

The supply shortage, which started in 2021, intensified  when First Quantum’s Cobre Panama copper mine unexpectedly closed in November 2023, causing a deficit as demand for copper concentrates from smelters outpaced the slow production growth at mines. This led to the situation where smelters scrambling for ore dropped their TCs/RCs, resulting in refining margins sitting at a 20-year- low, according to BigMint analyst Jayprakash Sahu.

"Currently, these margins have dropped to a 20-year low. This decline is due to additional smelting capacity coming online in China in 2025, adding around 16 million tonnes. Other global capacities, including Adani’s 0.5-million-tonne smelting plant in India, are also increasing, leading to intense competition for concentrate. As a result, mining companies now have more leverage, forcing smelters, particularly in China, to accept lower margins and TC/RC charges," Sahu added.

The development comes as  India’s biggest conglomerates are ramping up their stakes in the copper sector, positioning themselves to capitalise on its critical role in powering infrastructure development, renewable energy and the electric vehicle (EV) revolution. Companies like Vedanta, Aditya Birla Group’s Hindalco and the Adani Group are spearheading this copper rush, investing heavily in domestic refining capacities.

India has very limited copper ore reserves, accounting for about 0.31  percent of the world's total, and Hindustan Copper holds  around two-fifths of the copper ore reserves and resources in the country, according to its FY24 annual report. As the sole copper mining company in India, Hindustan Copper wields significant leverage over refiners like Hindalco Industries. Hindalco is a key customer of the state-owned mining company, purchasing 60 percent of its mined concentrate. Smelters like Hindalco are forced to accept TC/RCs give that Hindalco depends on Hindustan Copper for 60 percent of its concentrate supply, further increasing the miner's bargaining power in this tight market.

Hindustan Copper produced  27,404 tonnes  of copper concentrate in FY24, up 11 percent from the previous year. Its  annual copper ore production in India stood at  3.78 million tonnes in the same period, and plans to increase its mining capacity from around 4.0 million tonnes per annum now to 12.2 million tonnes per annum  through expansion of existing mines, reopening of closed mines and opening of new mines.

It anticipates copper demand to grow  by around 1.7 million tonnes a year  by 2027, boosted by the government's focus on renewable energy, increased penetration of EVs and demand from households for consumer durables.

The company primarily derives its revenue from sale of  copper concentrates,  wire rods and by-products like gold, silver and sulphuric acid. In FY24,  exports accounted for approximately 18.3 percent of total revenue.

Analysts have cautioned that the low TCs/RCs for copper, while weighing on the profitability of refiners in the near term, would not be sustainable in the longer run. On the brighter side for them, the government’s proposal to eliminate the 2.5 percent duty on copper scrap imports could provide Indian smelters with an alternative raw material source. This could help reduce their dependence on expensive concentrates and mitigate some cost pressures over time, according to BigMint.

BigMint reported last month that a a major Indian player has started sourcing aluminium and copper scrap due to the ore supplies shortage. It said that a large player from Gujarat has begun acquiring scrap through select traders, reflecting a shift in sourcing raw materials to cope with supply constraints.

Copper shortages began intensifying around 2021-22, driven by the growing mismatch between limited supply and the increasing demand for the metal. Prices rose to $9,176 per tonne in Jan 2025, up 6.6 per cent from  $8,609 per tonne in Jan 2024.

(With inputs from Shildaditya Pandit)