SHANGHAI, Nov. 15 (SMM) –
According to China Customs, China’s imports of scrap copper were 310 kt in October, down 24.4%, or 100 kt MoM, and within SMM’s expectations. YTD imports were 3.53 million mt, up 8.6% YoY. The SHFE/LME copper price ratio has been unfavorable for imports since August. Meanwhile, the price gap between refined and scrap copper was increasing, and together with higher fees for processing scrap copper, profits were squeezed. In this context, trader enthusiasm for scrap copper imports waned.
SMM believes that China’s scrap copper imports in November will remain between 300-350 kt, since the unfavorable price ratio and higher processing fees will continue. In addition, traders will become cautious without clear price direction, and the current high market risks will also dampen trader enthusiasm for imports.
Unwrought Copper and Copper Semis
According to China Customs, China’s imports of unwrought copper and copper semis were only 273.5 kt, down 94.9 kt, or 25.76% from September’s 368.4 kt, and was the lowest level of imports this year. The SHFE/LME copper price ratio has been low since August, down briefly to 7.4 in October, expanding import losses to RMB 4,000/mt. China’s imports of unwrought copper and copper semis during August and September did not accurately reflect the negative impact from the low ratio on imports due to the time-lagging effect. However, the sharp decline in China’s imports of unwrought copper and copper semis during October was a direct response to the low ratio. In addition, weaker downstream demand caused by high prices, as well as consumption of existing inventories also reduced demand for imported copper.
Although the SHFE/LME copper price ratio remains unfavorable, downstream producers are beginning to accept higher prices. Coupled with falling scrap copper inventories, demand in China for imported copper will likely improve. Copper imports will in November increase from October levels, but any increase will be marginal.
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