Copper scrap supply to remain tight in China: 2023 preview

Buying appetite in China for high-purity copper scrap of overseas origin is expected to remain strong in 2023, with questions over the supply of domestic scrap in the country, and a growing trend to repurpose scrap materials as part of the decarbonization movement across the world

In the last two months of 2022, fierce competition for material was particularly evident among Chinese buyers. There was even an extremely rare transaction for bare bright copper, reported bought in November at a slight premium over refined copper.

Discounts for candy and berry also narrowed notably in November 2022 — a time of year when Chinese copper producers rush to reach their annual production targets before the end of the year.

Fastmarkets’ monthly assessment of the No1 copper material, RCu-2A,1B (candy/berry), cif China, LME/Comex discount was 6-9 cents per lb at the end of November, the narrowest range since the assessment was launched in June 2021. It relaxed slightly to 7-10 cents per lb at the end of December.

That means consumers had been buying overseas scrap at a very narrow differential from the price of refined copper.

This trend is likely to extend into 2023, suppliers and importers of scrap and blister told Fastmarkets.

Intermediate products such as No1 and No2 copper material, or blister copper of 97-99% content, could be used by smelters to produce copper cathodes and other copper downstream products.

Over the past few weeks, China’s sudden withdrawal of its “zero-Covid” policy has led to a sharp increase in the number of infections in major cities nationwide. Labor shortages are widely reported by local media to be affecting delivery services and logistics.

“The scrap generation cycle in Europe slowed down greatly after the height of the Covid-19 outbreak two years ago, and it took quite a long time to come back. We should expect the same to happen in China,” a Southeast Asia-based scrap supplier source said, forecasting a decline in domestic scrap collection and sorting activity in the first half of 2023.

Such a lack of home-generated scrap would not be welcomed by Chinese copper producers.

Last month, the biggest producers pledged to have recycled copper make up 25% of their total production by 2025.

To reach this target, a lack of domestic scrap would mean that Chinese smelters would have to compete for overseas material, paying a higher price than their rivals.

“For the same No2 [scrap], China will quote 92% of the London Metal Exchange price but [South] Korea may only bid 89% or 90%. Even if there is a chance of rejection, we would still want to sell to China,” a Japanese scrap supplier source said.

But it is not only the Chinese who are eager to secure more metal scrap. Many US and European companies are becoming increasingly keen to step up their use of secondary materials to reduce their carbon footprint.

Last year, traditional copper miner Freeport-McMoRan made its first foray into building an electronic-scrap (e-scrap) facility in Southern Europe.

Downstream market participants such as Aurubis, Boliden, Brixlegg and LS MnM are advocating the concept of ‘green copper’ and targeting ‘climate-sensitive’ clients that are willing to pay a premium to reduce their carbon emissions.

Every company has a different definition of ‘green copper’, but the use of scrap in the production process has been a common denominator in the formulae.

Those at the very beginning of the scrap supply chain — recyclers- are also making efforts to capture a slice of the so-called green premium.

One of the biggest metals recyclers in Europe is in the process of adding carbon certificates to its diverse range of products. And industry bodies such as the Bureau of International Recycling are also in the process of updating benchmark values for carbon emissions savings in secondary copper, aluminium and ferrous production, compared with primary smelting.

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