Chilean copper giant Codelco has stunned Chinese buyers with record-high premium offers for 2026 supply, prompting several customers to say they may abandon next year’s term contracts in favour of spot purchases.
Announced on Thursday, the state miner is offering a premium of USD$350 a ton over London Metal Exchange prices, according to three individuals with direct knowledge of the talks. Last year, the premium settled at USD$89 a ton.
Some buyers said the offer arrived as a firm take-it-or-leave-it proposal. They expect decisions to start next week. At least three Chinese customers have already indicated they are ready to skip term contracts, according to people familiar with their positions. A fourth buyer, who has not yet received terms, said no one in the market would accept such a level and suggested that the figure sits far outside normal expectations.
Codelco did not respond to emailed questions. Market participants at the World Copper Conference Asia in Shanghai said the reaction signals that Chinese companies are reassessing the value of the benchmark that Codelco traditionally sets. They noted that China remains the world’s largest copper consumer, yet demand patterns have shifted in ways that make long-term agreements less attractive at very high premiums.
The sharp increase partly reflects the ease with which Codelco cargoes can move into the US Comex exchange, where forward prices for 2026 trade hundreds of dollars above LME levels. Three traders said these arbitrage opportunities appeal mostly to major international trading houses.
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Gap between Chinese appetite and producer ambitions may widen
They added that Chinese smelters struggle to execute the same trades because of logistics and regulatory constraints. However, another source argued that if Codelco lowered the premium, Chinese buyers might simply resell their cargoes to traders who could then ship them to the United States.
All sources declined to be named due to commercial sensitivities. Their comments surfaced as China’s refined copper imports from Chile fell in absolute terms as a share of total intake. Customs data shows the decline has persisted since 2023. Several delegates noted that the drop reflects both tight supply and evolving domestic purchasing strategies.
Copper prices remain volatile. Fears of a global shortage next year pushed LME copper to a record $11,200 a ton in late October. Prices sat near $10,868 a ton at 0703 GMT on the day of the offer reports. Market watchers said the premium jump mirrors these concerns, although they cautioned that Chinese firms are responding cautiously to aggressive pricing.
Additionally, traders said the pricing approach appears consistent with Codelco’s stance in Europe.
Reuters reported last month that the company offered European buyers a $325-a-ton premium for 2026. This marks an additional 39 per cent increase from the prior year. The move reinforced expectations that supply tightness will persist and major miners plan to extract higher returns from constrained markets.
Several analysts at the Shanghai event said the gap between Chinese appetite and producer ambitions may widen if premiums climb. They noted that more buyers could shift to spot markets if they believe term contracts no longer reflect fair value.
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Reliance on spot trades may strengthen over time
A growing shift away from long-term supply contracts may reshape global copper trade dynamics. If Chinese smelters increasingly buy on the spot market rather than sign fixed deals w
ith Codelco, the once central benchmark price could lose influence among Asia’s largest consumers. In that scenario, short term liquidity and real time market conditions would play a larger role in pricing.
Consequently, reliance on spot trades may strengthen over time. This could deepen the influence of global trading houses — companies able to leverage arbitrage between markets such as the London Metal Exchange (LME) and Comex in the United States.
Tom Price, analyst at Panmure Liberum, says that China is reducing its pace of copper consumption and stockpiling.
“We are going back to old fashioned drivers of copper, which is basically replacement cycles outside China,” said Price.
Further, Robert Edwards, principal metals analyst at consultancy CRU Group, agrees.
He argues demand growth potential in China is shrinking and expects more copper use will come from outside China.
If traders dominate more of the physical copper flow, smelters may rely less on direct producer relationships. Over time, buyers in China could turn to alternative suppliers, increase use of recycled copper, or reallocate procurement. This would erode the share of Chilean copper in China’s import mix.
Furthermore, such structural changes create a feedback loop as demand patterns shift and term contract relevance fades. The resulting fragmentation between regional premiums and supply sources would likely persist, affecting long term investing.
