“China is the big unknown,” a non-ferrous scrap seller said. “If China starts buying again, we will see a big impact on domestic prices, but we will not see the impact before December.”
China launched a new policy this month to reclassify high-purity copper scrap imports as recyclable copper raw materials, but US scrap exporters say it remains to be seen “what the risks are” of the new system.
China’s Ministry of Ecology and Environment said on October 19 that recycled copper and aluminium that meet the country’s standards for renewable metals, instead of solid waste, can be freely imported into the country starting from November 1.
“People are still waiting to see what the risks are – [China’s] new specifications are drastically different from the old ones, and we don't know any scrap yards that can produce to the new specifications,” the scrap seller told Fastmarkets. “People are waiting to see how harshly these specifications are enforced; because the amount of work we have to do just for a five cent premium may not be worth it.”
China had been the world's biggest importer of copper scrap for years. But its import volumes started to drop drastically since 2017 due to the introduction of various measures, including a hefty tariff on United States-origin copper scrap, an import quota, a ban on the import of Category 7 copper scrap (low-quality scrap that requires dismantling), as well as stricter threshold for impurities contained in scrap cargoes, Fastmarkets has previously reported.
China's copper scrap imports went from 3.6 million tonnes in 2017 to 1.5 million tonnes in 2019.
The seller pointed out that “China needs a lot of No2 copper scrap, but if they don't allow the material to come in, they will have to pay extra for other scrap grades.”
China’s policy change has already had some impact on US copper scrap prices, with one domestic mill reportedly offering to pay 38 cents under the Comex copper price for No2 copper scrap to compete with export numbers.
Fastmarkets assessed the copper scrap No2 copper, discount, buying price, delivered to refiners at 41-43 cents per lb on Wednesday November 18, falling from 42-44 cents per lb the previous week.
Conversely, the copper scrap No1 copper, discount, buying price, delivered to brass mill US was assessed at 13-15 cents per lb on Wednesday, rising by a cent from 12-14 cents per lb last week.
The discount for brass ingot makers’ No1 copper scrap widened to 25-28 cents per lb from 25-27 cents per lb in the same comparison.
All other copper scrap discounts were flat week on week.
The US copper scrap market has been oversupplied for a good part of the year, with sluggish domestic demand keeping spreads wide for weeks. Scrap production has also been ample due to the strong Comex copper scrap price, which has been consistently above $3 per lb over the past several months.
The strong recovery in copper’s price reversed the trend from the second quarter of 2020, when a crash in copper prices and industrial shutdowns led to significant tightening in copper scrap generation in the US, which resulted in end consumers buying more cathode than usual for feed material.
It is only been in the last two weeks that spreads have begun to normalize, with domestic copper mills re-entering the market to buy material.
The most-active March-delivery Comex copper contract settled at $3.2125 per lb on November 18, up almost 2.3% from $3.134 per lb the week before.
A brass ingot maker noted that, in the last week, the “Comex copper price has gone up, but the copper scrap supply hasn't increased as much.”
“That may be because [copper and brass scrap] inventory may be depleted at the yard level,” the ingot maker told Fastmarkets.
Nearly all the brass scrap prices strengthened this week, especially red brass solids and composite boring.
Fastmarkets assessed the copper scrap No1 comp solids, buying price, delivered to brass ingot makers (commonly called red brass) at $2.17-2.20 per lb on Wednesday, up from $2.14-2.17 per lb one week earlier.
The buying price for copper scrap comp borings, turnings rose to $2.15-2.17 per lb from $2.13-2.16 per lb in the same comparison.
Radiators were assessed at $1.75-1.78 per lb on Wednesday, narrowing upward from $1.74-1.78 per lb range the week before.
US copper scrap exporters are waiting to see how China’s new regulations affect the flow of scrap metal to the Asian country, which could have a significant impact on domestic copper scrap prices.