Price: Higher scrap tax points narrow refined-scrap copper price spread last week
China's refined copper prices rose week on week last week, and copper scrap prices followed, although the increase was smaller than that of refined copper. However, as the copper scrap invoice point in China rose to 12% in August from 10.5% in July, the tax-inclusive scrap price gained more than refined copper, causing the tax-inclusive refined-scrap copper price spread to narrow last week. Looking ahead, as the invoice point holds steady at 12% and both refined and scrap copper prices are expected to edge lower from elevated levels, the refined-scrap spread still has room to narrow slightly, though it will likely remain relatively high overall.
Data Source: Mysteel
The weekly average import prices for red copper scrap (99%-99.5% Cu) in China increased slightly last week, following the rise in copper and copper scrap prices. Meanwhile, as domestic and overseas copper scrap prices fluctuated, China's copper scrap import margins remained deeply negative, ranging from -Yuan 2,203.61/tonne to -Yuan 1,013.74/tonne.
Looking ahead, import demand is expected to persist as the impact of domestic tax policies on the sector continues, but a sharp further increase is unlikely in the near term given poor margins.
Supply: Higher copper scrap prices boost spot supply
Spot copper scrap circulation increased last week. For red copper scrap, higher prices widened profit margins for upstream traders, prompting them to release accumulated supply, which markedly improved spot availability. However, the sustained price rally left holders reluctant to purchase at high prices and keeping buying quotes conservative. Consequently, the slower procurement pace partly constrained the increase in market circulation. For brass scrap, upstream traders actively sold to lock in profits, but persistently weak end-user demand led actual transactions to fell short of expectations, and most dealers were unwilling to build too much inventory, which limited overall trading activity. Overall, while spot copper scrap circulation rose last week alongside higher prices, the increase was constrained. Looking ahead, copper scrap prices are expected to fell slightly from elevated levels in the near term, which could tighten spot supply.
Demand: Spot trade volumes diverge but overall rise WoW
Spot trading volumes in China's copper scrap market rose week on week last week. For red copper scrap, downstream mills largely maintained hand-to-mouth procurement, with deals clearly diverging and spot cargoes flowing mainly to mills with pricing advantages. Downstream producers struggled to sell finished products, leading to rational raw material buying following orders received. For brass scrap, as copper prices continued to rally, downstream firms broadly lifted ex-works quotes to lock in order margins, but end-user acceptance of high-priced finished goods was low, making it difficult to push through actual orders. At the same time, brass scrap prices rose in tandem with copper, further adding to downstream mills' cost burdens and limiting the improvement in actual raw material procurement. Overall, with increased spot circulation and low raw material inventory at enterprises, copper scrap trading volumes rose week on week, but elevated prices and relatively weak orders continued to weigh on downstream purchasing appetite.
Looking ahead, downstream consumption is unlikely to improve significantly in the near term. For copper anode producers using scrap, elevated copper scrap prices and tight availability are still expected to curb their copper scrap purchasing needs. As for secondary copper processors, weak order inflow from end-users during the off-season is likely to continue weighing on their copper scrap procurement.
More regular analysis and comprehensive data on China's copper industry are available in Mysteel Copper Weekly, Mysteel Copper Monthly, and Mysteel Copper Database. Reach out to us via Mysteel's official website: Latest & Reliable Copper Market Price in China | Mysteel, and follow Mysteel Non-Ferrous for more insights!
Written by Zhaorui Cui, cuizhaorui@mysteel.com
Edited by Mingyuan Wang, wangmingyuan@mysteel.com
