EXCLUSIVE: New China policy allows 240kt of copper scrap imports in Q319, down 60% y-o-y [UPDATED]

China has only permitted 240,429 tonnes of copper scrap imports in the entire third quarter of 2019 for the first batch of quotas, sending panic across the local scrap industry, according to an official list of Chinese importers granted import quotas, seen by Fastmarkets, on Thursday June 20.

The list, comprising 53 metal scrap importers, was compiled and released by the centre of China Solid Waste and Chemicals Management under the Ministry of Environmental Protection, and also includes aluminium and ferrous scrap importers, although most of the quotas granted are for copper scrap.

From July 2019, the Chinese government is introducing a quota system to restrict imports of category-6 copper scrap in a bid to reduce the pollution arising from the scrap processing business. This new announcement on the copper scrap import quota represents the amount of high quality scrap – both No1 and No2 scrap, including birch, cliff, candy and mill berry – that will be allowed into the country.

Up until July, China’s category-6 copper scrap importers had not been confined by any quotas.

‘We have just got the list today, it is fresh. It’s surprising to see that only the major importers in Ningbo and Taizhou are allowed to buy overseas scrap. I didn’t see any big companies from Guangdong and Jiangxi on the list,’ a Ningbo-based major scrap importer source told Fastmarkets on Thursday.

In 2018, China imported a total 2.4 million tonnes of copper scrap, according to customs data, which equates to a quarterly average of approximately 600,000 tonnes of copper scrap.

That means that the first batch of third-quarter 2019 import quotas at 240,429 tonnes represents only 40% of the quarterly average import volume of 2018.

This is estimated to be the biggest batch of quotas granted because processors in Ningbo and Taizhou are more compliant to the environmental regulations. This round of quotas is expected to amount to over 70% of the total quotas granted for the third quarter.

“We are still awaiting the announcement of the remaining quotas,” a Guangdong-based scrap importer source that works with a major copper refinery said.

“We will need to find more copper raw materials now, we’re trying to buy as much African and South American blister copper as possible,” a major refinery source in China said, after being informed that the company could not get hold of any imports in the quota in the third quarter for the time being.

“The third-quarter operation sounds alright for us, yet we have to source more copper ingots from overseas and try to recycle more copper domestically,” the first source said.

This round of quotas can be consumed in both the third and fourth quarter of this year, while the first source said they plan to re-apply for more quotas for the fourth quarter.

The fear of not receiving copper scrap in the import quota has been overshadowing the Chinese copper market in recent months.

Fastmarkets assessment of the discount for No 2 copper scrap, imported in China, was at $0.34-0.38 per lb for May, narrowing from $0.37-0.42 per lb in April due to weaker copper price over the month. Generally, the possibility of not getting imports quota has strongly dampened spot interest in scrap.

The approved copper-scrap import quota is also surprisingly small against a backdrop of tight availability for copper raw materials, such as copper concentrates and blister copper in China.

Amid the tight supply availability, Fastmarkets’ copper concentrate Asia-Pacific treatment and refining charges (TC/RCs) index dropped to $54.10 per tonne/$05.41 per lb on June 14, its lowest since the index launched in 2013.

Fastmarkets monthly assessment of the refining charges paid for 98-99% blister copper, cif China, also remained at a low level of $160-170 per tonne on May 31, unchanged since March, following an outage at major supplier Konkola Copper Mines, the Zambian tax revamps and continued interest in spot tonnages.