The long-term impact of China renaming scrap metal as renewable material remains to be seen, sources said, citing a potential increase in scrap exports from the United States to the Asian nation, although China’s scrap import quota system will continue through 2020.
The impact of China restricting scrap imports was felt keenly in the US for much of 2019, which saw an oversupplied market with soft domestic demand and sellers struggling to move metal. Looking ahead, sources said the true significance of China renaming high-purity non-ferrous scrap as recyclable materials for the US market will be apparent only if it translates to an increase in scrap exports from the US to China.
The US exported 3.17 million tonnes of copper scrap worldwide in 2018 and 2.61 million tonnes of copper scrap in January-November 2019, according to government statistics.
Of that, 1.06 million tonnes of copper scrap went to China in 2018; for the first 11 months of 2019, that number fell to 397,073.055 tonnes.
The effect of an oversupplied market has extended into 2020 as well, a scrap seller pointed out, as mills encouraged forward selling of metal “to lock in the spreads in late 2019.”
“I have never seen a market when mills have bought so far ahead - because they were nervous about selling their products,” the seller told Fastmarkets.
As a result, there is greatly reduced spot demand for copper scrap.
“Sellers sold forward as there was so much oversupply,” the seller said. “[It] remains to be seen with China’s renaming [of scrap metal] if the US sells more to China and it balances the metal supply domestically.”
A second seller noted that his spreads for copper scrap sold to refiners was wider than the rest of the market as “mills are not buying on the spot.”
A scrap buyer confirmed he was not buying until April-May.
“It is still a buyer’s market, but it is now moving towards being better-balanced,” the buyer said.
A copper scrap consumer, however, said demand from his end customers was “picking up” and that it is a “good time for those moving metal.”
Quota system in place in 2020
A major consequence of China importing fewer scrap tonnes from the US was that domestic dealers were forced to seek new markets, a second scrap buyer said, and the margins of US consumers of scrap improved as well.
“The most interesting part was regarding the continuation of the quota system through 2020,” the second buyer said.
“This means Chinese buyers cannot simply buy what they want, when they want. This will continue to control their participation in the US market,” the second buyer told Fastmarkets. “Scrap discounts are as wide as they are today because the Chinese are not allowed to buy all they want from the US. This is a major benefit to US consumers of copper scraps as wider discounts directly equate to improved margins.”
A second consumer was more cautious.
It is “way too early to tell the impact of China renaming scrap - it is a wait-and-see [situation],” the second consumer said, echoing a broader view heard across the US copper scrap market.
Fastmarkets assessed the copper scrap No1 copper, discount, buying price, delivered to refiners, at 21-23 cents per lb on Wednesday January 15, down by a penny on the low end compared with 22-23 cents per lb a week earlier.
The discount for No2 copper, delivered to refiners, narrowed upward by 1 cent to 39-40 cents per lb on Wednesday from 38-40 cents previously, while that for No2 copper, delivered to brass ingot makers widened downward by 1 cent to 40-42 cents per lb on the same day from 41-42 cents per lb one week earlier.
Fastmarkets assessed the buying price for copper scrap No1 comp solids (also known as red brass), delivered to brass ingot makers, at $1.85-1.87 per lb, widening upward from $1.85-1.86 per lb on January 8.
The assessment of the buying price for comp borings, turnings, delivered to brass ingot makers, rose by 1 cent overall to $1.84-1.85 per lb from $1.83-1.84 per lb in the same comparison.
Fastmarkets assessed the buying price for copper scrap radiators, delivered to brass ingot makers, at $1.52-1.55 per lb on January 15, up by 7 cents from $1.45-1.48 per lb the previous week.
The most-actively traded March-delivery Comex copper contract settled at $2.866 per lb on January 15, up from $2.812 per lb one week earlier.