[SMM analysis] Why does the price difference of refined copper expand all the way to occupy the consumption of refined copper under the restriction of copper import?

SMM3, March 8: since 2019, there has been an obvious trend for domestic scrap copper to replace refined copper. According to SMM research, because the price difference between refined copper rod and scrap copper rod has expanded to more than 1,000 yuan, downstream tends to purchase scrap copper rod to stimulate scrap copper consumption. Especially in Guangdong, Henan, Jiangxi and other copper rod more concentrated areas. Why is the utilization rate of scrap copper still on the rise in the face of the domestic policy of restricting the import of scrap copper?

1. The gradual expansion of the price difference of refined copper in China since the beginning of this year is one of the main reasons to stimulate the replacement of scrap copper. According to SMM data, the price difference of refined waste was as high as 1625 yuan per ton on February 25, compared with 360 yuan per ton on January 10.

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After 2019, the main reason for the recent sharp increase in refined copper price difference was that the price of refined copper rose rapidly, breaking through the 50000 yuan mark all the way. On March 5, the quotation of SMM1# electrolytic copper was 50250 yuan per ton. On the other hand, compared with the refined copper industry chain, The copper scrap industry chain has weak conductivity to the price. Therefore, when the price of refined copper rose rapidly, the price of scrap copper did not keep pace, and the gap between the two gradually widened. Scrap copper price advantage highlights, instead of refined copper.

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2. Imported scrap copper is still increasing. Although the full implementation of the "scrap 7" policy this year will affect the physical volume of scrap copper raw materials imported, due to the complementary role of the six types of scrap copper, the average grade of scrap copper has increased from 52% to 76%, resulting in a significant increase in the amount of metals. Therefore, the supply of scrap copper raw materials overseas has not been greatly affected by the tighter environmental protection policy.

In January 2019, China imported 180700 physical tons of scrap copper, down 8 per cent from a year earlier, according to data released by the General Administration of Customs. However, due to the increase in the average copper grade to 75.83%, the amount of scrap copper imported in January was 137000 tons, an increase of nearly 39% over the same period last year, and the amount of scrap metal imported in January 2018 was 98800 tons.

3. The supply of domestic scrap copper is sufficient. Due to the poor consumption of scrap copper at the end of last year, part of the supply has not been released, copper prices rose after the year, the enthusiasm for delivery is high, so that the current domestic supply of scrap copper is adequate.

No matter the processing end or the smelting end, there is no shortage of scrap copper supply, which is also the main reason for the obvious expansion of refined scrap price difference.

What will be the trend of fine scrap copper price difference in the future? SMM analysts said that if the price of refined copper continues to rise, the premium of refined copper will remain high, and the trend of replacing refined copper with scrap copper will continue.

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