SHANGHAI Aug.15 (CBI China) -- Tight scrap copper supply and weak consumption has been the norm for the past four months, and CBI predicts these depressed conditions will continue into September at a minimum.
China is heavily dependent on imports of scrap copper, and market shortages are directly attributed to declining imports over the past three months. For smelters who can use both scrap and refined copper as raw materials, they usually determine which to use by calculating metal content, fabrication fees, and tax rates. Smelters have preferred to use refined copper during the past several months, leaving imported scrap copper traders on the sidelines. Small traders stopped importing scrap, while larger traders reduced imports and would only continue when market trends became clear. Although falling imports have lead to shortages of scrap copper, downstream demand remained weak, it is unprofitable to import at current prices. Many traders will continue to avoid scrap copper, adding to supply pressure.
Downstream consumption has been lackluster. Refined copper smelters using scrap copper as their raw material shut down units for maintenance in order to reduce losses in the face of weakening copper prices. A small number of downstream producers engaged in low-oxygen copper rod production chose to use refined copper in place of scrap. Those unable to use refined copper had to purchase higher-priced scrap copper to continue production, and were reporting little or no profits.