[SMM Analysis]China’s Holiday Pause Cools Asian Copper Scrap Market; Recovery Uncertain

Starting next week, the Chinese market will largely enter the Lunar New Year holiday rhythm. According to SMM, most logistics companies will suspend operations after this Friday, and the majority of copper scrap traders will begin their holidays from Tuesday to Wednesday next week. Pre-holiday restocking has essentially come to an end. Overall, under the backdrop of persistently high copper prices, this year’s pre-holiday stocking activity has been noticeably weaker than in previous years, as high prices have suppressed downstream purchasing appetite and led to subdued trading activity.

As the world’s largest consumer of copper scrap, China’s temporary withdrawal from the market has directly weakened overall demand across Asia. Regional buying interest has quickly faded, and the market has shifted from a state of “active inquiries and transactions” to one of “quoted prices but limited deals,” leading to a visible pullback in scrap trading prices across several markets.

The Korean domestic market has reacted most visibly. With weakening demand compounded by the approach of holidays, trading discounts for copper scrap have already declined. For example, for No.2 copper scrap, mainstream transaction levels have fallen from around a 90% LME discount ratio previously to approximately 88%–89%, representing a 1–2 percentage drop within a short period. Negotiation space in the market has widened, and sellers have shown greater willingness to concede on pricing.

The Japanese market has also been affected by the regional cooling in demand. However, as Japan does not observe the Lunar New Year holiday, downstream consumption and production schedules have not been significantly disrupted. As a result, the decline in discount ratios has been more moderate, at around 0.5%. Market circulation remains relatively stable, though buyers have clearly become more cautious and procurement pace has slowed.

Based on past market patterns, during the Lunar New Year holiday window, the flow of copper scrap typically undergoes a temporary structural shift, from being primarily consumed by fabricators to being absorbed more by smelters.

The logic behind this lies in the different operating characteristics of these sectors. Fabricators such as copper rod plants, foil mills, and cable producers generally complete their raw material stocking before the holiday and then enter shutdown or low-operating periods, leading to a sharp drop in actual consumption and spot purchasing demand. In contrast, smelters operate on a continuous production basis and usually maintain relatively stable operating rates throughout the holiday period, meaning their raw material consumption does not decline as sharply. In the absence of demand from fabricators, more scrap material in circulation naturally flows toward the smelting system. This shift is also an important reason why discount ratios tend to loosen and price levels soften during the holiday period.

Looking ahead to the post-holiday market, SMM’s discussions with market participants indicate that most industry players remain cautious, or even pessimistic, about the pace of recovery. Traders generally believe that the market currently lacks a core driver to revive trading activity, and elevated copper prices remain the key factor suppressing demand. Without a meaningful price correction, downstream buyers are unlikely to rebuild active procurement interest, leaving the scrap market facing a short-term situation of “prices quoted, but few transactions.”

Therefore, whether the market regains momentum after the holiday will depend less on the end of the holiday itself and more on whether copper prices experience an attractive pullback that can reopen the psychological price gap between buyers and sellers. If copper prices continue to fluctuate at high levels, the recovery of the copper scrap market is likely to be slower than in previous years, with trading activity postponed to a later time window.