It’s déjà vu for China’s copper smelters. But how will it affect the global price of copper? The shortfall China faced in mid-2024 following the limited availability of copper ore in June led the country to significantly increase its imports of copper scrap as an alternative raw material.
In fact, in the first five months of 2024, the world’s largest refined copper producer brought in nearly 1 million tons of scrap, putting imports on track for the highest level since 2018. By using more scrap, smelters can maintain record copper production despite the ongoing strain in the ore market.
Now domestic smelters are facing a similar situation after many Chinese metal importers have halted their U.S. copper scrap purchases. According to Beijing Antaike Information Development Co., the purchase pause began in mid-November, as the shipments will likely arrive around January 20. This is when Trump is set to assume the presidency.
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China and U.S. Seem Ready for Another Trade War
Trump has threatened a 60% tariff on Chinese imports. He also recently promised to impose an “additional 10% tariff” on imports from China, increasing the likelihood of retaliatory measures from Beijing.
The U.S. is the largest exporter of copper scrap, with a large portion being bought by China. According to Bloomberg, the possible loss of U.S. imports may occur when Chinese smelters are already facing a scrap metal shortage caused by the unintended effects of a change in local governments’ tax rebate policy. Stopping purchases from the U.S. will further tighten scrap supplies and increase demand for refined copper, potentially leading to price volatility and higher processing fees.
According to available data, China has already imported 361,099 metric tons of scrap copper from the U.S. as of September 2024. This represents one-fifth of China’s total scrap copper imports for the first ten months of the year. All of this seems to indicate a highly volatile market, at least in the short term.
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Changes in Price of Copper Stem from Recent Moves in China
In October 2024, China announced significant policy changes to its scrap copper import regulations, aiming to bolster its recycling industry and reduce reliance on primary raw materials. Smelters remelt scrap copper and turn the subsequent raw material into refined copper, which is later made into copper products.
The report outlines the following main changes:
- The five categories for recycled copper raw materials will be cut down to three: copper wire, mixed copper materials and copper nodules. This aims to simplify the importing process through better standardization.
- “Brass recycled raw materials” will be now called “copper alloy materials.” Copper-nickel and high-copper materials have also been listed in this category.
- Wrought aluminum and recycled very pure aluminum raw materials will also now be on the “import list.”
As for tolerance levels, No. 1 and No. 2, copper scrap will still need a minimum copper content of 97%, while copper nodules must contain at least 98% copper.
Copper Remains Bullish Going into 2025
Where the global copper scrap market is concerned, Asia Pacific remains the fastest-growing region. For this reason, it will likely head the regional market by revenue in 2030, with analysts projecting that the region will reach US $65,513.3 million by that year. Following close behind is Europe. In 2023, the European region represented 22.5% of the global copper scrap market in terms of revenue.
At present, copper is quite bullish. The metal is currently trading at approximately $4.10 per pound, which represents a roughly 20% increase over 2023. The recent price stability, along with minor fluctuations, suggests a healthy market. Prices also remain above their 50-day and 200-day moving averages, indicating sustained bullish momentum even as production reductions in China continue to drive the recent price increases.
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