Price: Further rise in copper scrap tax points narrows refined-scrap copper spread
China's refined copper spot prices dropped by 0.8% week on week last week. Although copper scrap prices declined along with copper prices, the tax-inclusive copper scrap price fell less than refined copper as scrap invoice tax points rose further, narrowing the refined-scrap price spread 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 November 2-6 decreased 0.91% compared with October 26-30. Meanwhile, amid volatile domestic and overseas copper scrap prices, China's copper scrap import profit increased further last week, ranging between Yuan 3,176.03/tonne and Yuan 4,052.34/tonne. Looking ahead, 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: Price slump disrupts circulation with holders cautious
For red copper scrap, copper prices fell sharply last week and spot transactions contracted markedly. Upstream trading remained quiet overall, with most traders' inventories in losses. Coupled with ongoing macro disruptions and limited spot circulation of copper scrap, many holders opted to hold back and wait on the sidelines. For brass scrap, the center of copper prices shifted substantially lower and brass scrap prices followed suit, despite relative resilient on the downside. Holders' profit margins were visibly squeezed, making restocking at low prices difficult. Meanwhile, downstream enterprises, being highly sensitive to prices, would only accept low-priced material, leaving supply and demand hard to match and overall trading subdued.
Looking ahead, prices are likely to remain volatile in the short term under macro influences, which could further weigh on holders' willingness to sell, and spot supply is unlikely to see any material improvement in the near term. Moreover, with the premium on tax-inclusive copper scrap rising further, scrap available at acceptable prices will become increasingly scarce.
Demand: High-priced feedstock curbs purchasing
For red copper scrap, downstream producers continued to struggle with weak production and sales, showing limited willingness to purchase raw materials and relying mainly on drawing down existing inventory. Deals were concentrated among a small number of price-competitive enterprises. With premiums on tax-inclusive copper scrap running high, sourcing tax-invoiced material remained difficult, and downstream enterprises are likely to see persistently weak production and sales in the short term. For brass scrap, the retreat in copper prices slightly lifted end-user purchasing sentiment, and orders recovered modestly. However, most enterprises remained burdened by high-priced feedstock purchased earlier, keeping finished-product quotations elevated and constraining any meaningful growth in orders, which in turn suppressed demand for brass scrap purchases. Looking ahead, certain secondary copper anode producers have expansion plans for November–December in order to sprint toward their annual production targets and fulfill deliveries under annual long-term contracts, but the scale of the increase will be constrained by raw material availability and processing margins. Moreover, compared with the same period in previous years, processors' output and their raw material procurement remained at relatively low levels.
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Written by Zhaorui Cui, cuizhaorui@mysteel.com
Edited by Mingyuan Wang, wangmingyuan@mysteel.com
