Price: Smaller scrap price rise widens refined-scrap copper price spread
China's refined copper spot prices increased by 0.46% week on week last week. Although copper scrap prices rose along with copper prices, the increase was smaller than refined copper, so the refined-scrap copper price spread expanded slightly last week. Looking ahead, copper scrap tax points are expected to remain high, and scarce compliant tax-inclusive scrap supply is pushing quotes higher; consequently, enterprises' tax-inclusive scrap purchasing costs are unlikely to fall, and copper scrap's economic advantage over refined copper is expected to remain limited.
The average import prices for red copper scrap (99%-99.5% Cu) in China between October 26-30 increased 0.22% compared with the price between October 19-23. Meanwhile, amid volatile domestic and overseas copper scrap prices, China's copper scrap import profit remained at elevated levels last week, ranging between Yuan 2,978.86/tonne and Yuan 3,960.81/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 a shortage of tax-inclusive, reasonably priced scrap copper is likely to intensify, keeping demand for imported scrap strong. Therefore, China's copper scrap import volumes are expected to remain relatively high in the near term.
Supply: Copper prices spike then retreat, tightening spot circulation
For red copper scrap, copper prices rallied and then fell back last week, leaving overall trading subdued. Upstream traders remained cautious, as most had sold into the rally and were left with low inventories. Combined with tight spot circulation, material flowed preferentially to higher-priced regions, while traders showed little willingness to restock, so neither buying nor selling saw any meaningful increase in volume. For brass scrap, prices saw only modest adjustments. Early in the week, although most upstream holders opted to sell at high prices, weak downstream demand meant actual transactions were far from ideal. As copper prices subsequently retreated, holders' trading margins gradually narrowed and market sentiment cooled further. Looking ahead, prices face considerable downward pressure in the near term. Holders, reluctant to sell at a loss, are therefore likely to slow their selling, and spot circulation in the copper scrap market is expected to remain tight.
Demand: Downstream purchasing appetite remains limited
For red copper scrap, downstream producers mainly purchased on a need-to-use basis, with transactions clearly diverged. With month-end approaching, some firms slowed their procurement pace and showed a growing preference for tax-invoiced scrap, leaving spot deals concentrated in some price-competitive regions. For brass scrap, although downstream processors had plans to ramp up purchases and production ahead of month-end, insufficient support from end-use demand made large-scale deals unlikely. Compounded by elevated raw material prices, purchasing demand was suppressed, and most enterprises only replenished the minimum needed to keep production running, leaving the market in a standoff overall. Looking ahead, amid policy disruptions, the pattern of high prices and scarce volumes is unlikely to improve materially in the short term. Downstream enterprises will therefore still struggle to source scrap at acceptable prices and are expected to keep purchases limited to essential needs. Coupled with limited growth in end-use orders, both downstream copper scrap procurement volumes and operating rates are unlikely to see any marked increase in the near term.
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Written by Zhaorui Cui, cuizhaorui@mysteel.com
Edited by Mingyuan Wang, wangmingyuan@mysteel.com
