Price: Tax hike narrows refined-scrap copper price spread
China's refined copper prices edged up last week, and copper scrap prices followed. As the tax rate on copper scrap rose in September, tax-inclusive copper scrap prices posted a larger increase than refined copper, narrowing China's refined-scrap copper price spread slightly last week. Looking ahead, with expectations of September's consumption improving but persistently tight spot supply, copper scrap prices are likely to remain firm, and the refined-scrap copper price spread is expected to narrow. Copper scrap invoice points were 13% in September, significantly increasing scrap costs, making it difficult to continue using the refined-scrap copper price spread as an indicator of substitution between refined copper and copper scrap in actual transactions.
Data Source: Mysteel
The weekly average import prices for red copper scrap (99%-99.5% Cu) in China increased slightly last week. Meanwhile, as domestic and overseas copper scrap prices fluctuated, China's copper scrap import profit increased, ranging from -Yuan 556.13/tonne to Yuan 398.04/tonne. Looking ahead, the constraints of the reverse-invoicing policy on China's scrap sector will be hard to ease in the near term, and invoice shortages are likely to intensify, keeping demand for imported scrap strong. Meanwhile, according to market research, despite sharply fluctuating copper prices, the domestic sales deduction for imported bare bright copper remained basically within Yuan 2,000/tonne, leading to high market acceptance of imported copper scrap. Therefore, China's copper scrap import volumes are expected to remain relatively high in the near term.
Supply: Cautious holder sentiment tightens spot circulation
Spot circulation in China's copper scrap market was relatively subdued last week. Regarding red copper scrap, although prices remained high and rangebound, spot supply volumes did not increase significantly, mainly because upstream traders were cautious about selling amid low on-hand inventories and difficulties in sourcing material. Regarding brass scrap, affected by repeated copper price swings, upstream traders mostly adopted a buy-low-sell-high approach, but limited price fluctuations in brass scrap led to thin trading margins and limited profit potential, leaving actual spot circulation weak. Looking ahead, given tax policy uncertainty, copper scrap spot supply in China is unlikely to improve significantly, and the overall market is expected to remain characterized by high prices and limited trading.
Demand: Scrap trade volume declines WoW
China's copper scrap transaction volume declined week on week last week. Regarding red copper scrap, downstream purchasing demand was divided, with more material flowing to regions offering price advantages. Some operating processors, constrained by policy factors, preferred invoice-inclusive copper scrap or refined copper as raw materials, limiting actual scrap transactions. Regarding brass scrap, end-users showed insufficient acceptance of high-priced material, while downstream enterprises had little room to lower their products' prices, resulting in poor orders and further suppressing their raw material purchasing interest. Looking ahead, persistently tight copper concentrate supply is expected to keep demand for secondary copper anode strong. However, anode smelters, constrained by invoice requirements, can only purchase invoice-inclusive copper scrap at high prices, which raises production costs and squeezes margins, likely leading to a cautious stance on raw material restocking. As for secondary copper semis, the raw material shortage is unlikely to ease in the short term, and the transition to the peak consumption season will take time, so their raw material purchasing demand is unlikely to improve significantly in the near term.
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
