FOCUS: China cuts copper scrap import licences, quotas

China is already enforcing some restrictions on copper imports, cutting quotas and limiting the number of licences in some regions of the country, sources told Metal Bulletin, although a full ban on scrap copper imports had not yet been confirmed.

According to speculation that has been rife since July, China could ban category 7 scrap copper imports from 2019, even though the latest imports category for solid waste released by the Ministry of Environmental Protection (MEP) maintained category 7 copper scrap under the list of “restricted imports” or “limited imports” rather than “forbidden imports.”

Still, market participants are confident that a ban will come into effect in 2019 given that such a policy is in line with the country’s leadership strategy.

A reform group led by Chinese President Xi Jinping met in April this year to discuss a range of policy changes, including significant reductions in the categories and volumes of waste imports.

Although an official statement on the ban has not yet been announced, stricter measures have been taken by both the MEP and by Customs on scrap imports.

Imports licences harder to secure
Several sources directly involved in the copper scrap trading business have confirmed to Metal Bulletin that trading firms are unable to get 2018 import quotas and that all scrap business must occur between overseas sellers and domestic end-users directly.

For the copper scrap imports business, local buyers and users require a domestic consignee certification. This is issued by the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China (AQSIQ) before any involvement in the business; it must be renewed every three years.

For importers, an imports licence, which is issued annually by the MEP, will be a pre-requisite for traders and end-users alike.

All licences are due for renewal during the fourth quarter; however, traders will no longer be able to secure them for 2018.

“It’s something that’s already happening. Reducing the number of market participants in this business will also help the regulators to implement its new rules,” one scrap end-user said.

In an official announcement in July this year, China’s State Council ordered related departments to reduce imports of solid waste as well as improve the imports licence system and halt trading-agent imports.

The market widely agreed that 2018 will be a transition year for scrap during which much stricter rules over imports will be enforced gradually, lowering the risk of volatility when the ban comes into effect in 2019.

But those Chinese companies that have already set up an overseas presence to trade scrap will still be able to sell to Chinese end-users via their non-domestic units, one scrap trader claimed.

Imports quotas shrinking or disappearing

When companies are granted an import licence from the MEP, a certain quota will also be agreed based on each company’s trading volumes in the previous year.

But some of the quotas already approved for 2017 have been withdrawn by the MEP and quotas for 2018 are expected to be reduced further.

Several scrap importers in China’s Guangdong Province have had their quotas reduced while fresh quotas for 2017 were mostly cancelled, sources told Metal Bulletin.

“Not only have quotas been reduced but Customs are also carrying out stricter inspections over imports so it’s also in doubt if you can fully use the rest of the quota,” one Guangdong-based importer claimed.

Tightness in imported copper has been felt in some regions where some copper rod producers are seeking refined copper as a raw material to replace scrap, market participants said.

Domestic cathode has continued to trade at premiums of around 160-250 yuan ($24-38) per tonne this week.

Q4 imports in focus
Trading in scrap in August remained solid even though futures prices retreated from three-year highs when buyers and sellers came back to the market while prices stabilised.

According to Metal Bulletin’s assessment for No. 2 copper (Birch/Cliff) of US or European origin with copper content of 94-96%, the discount to London Metal Exchange or Comex copper prices increased to 29-32 cents per lb ($639-705 per tonne) on a cif basis on Monday September 25 from 32-34 cents per lb at the end of August.

“Some importers will try to use up their quota by the end of this year so imports during the fourth quarter are likely to be high,” one copper scrap importer said.

In August, China imported 309,767 tonnes of copper scrap, down 1.67% from last year but up 7.83% month on month, Chinese Customs data showed.

Imports in the first eight months of this year of 2.45 million tonnes were up 13.65% from a year ago

Hong Kong, the US and Australia have been the top three sources of copper scrap so far in 2017, with imports totalling 438,770 tonnes, 339,169 tonnes and 304,379 tonnes respectively.