SHANGHAI, May 24 (SMM) – The appeal of copper scrap among Chinese consumers further dissipated as the US-China trade dispute intensified. Lower copper prices lowered the discount against copper cathode and this drove consumers to copper cathode.
London copper prices fell below the psychologically-sound level of $6,000/mt, to a low of $5,880/mt on Thursday May 23. Prices of copper scrap, however, held firm as tighter supplies kept traders from selling. This narrowed the price spread between copper cathode and copper scrap to 620 yuan/mt as of Thursday.
Most domestic copper processors who use copper scrap as feedstock told SMM that supplies of copper scrap this year showed much more tightness than last year. Sellers were very keen to hold offers firm, despite recent sharp declines in copper prices.
In order to maintain production, some processors purchased copper scrap at high prices, which narrowed profit margins and eroded production enthusiasm. This weakened consumption of copper scrap and bolstered consumption of copper cathode.
From July 1, Chinese copper scrap importers will require approval from the government before they import seaborne Category Six materials. This triggered an import rush in the first half of this year, as evidenced by higher copper scrap imports in Cu content compared with last year.
SMM learned that applications for solid waste imports have begun, and the Ministry of Ecology and Environment will grant the first batch of import permits at the start of July, at the earliest. The number of approved imports is likely to be limited, and copper scrap imports are set to shrink in the second half of the year.
Domestic copper scrap supplies are unlikely to make up for lower copper scrap imports amid the government’s tighter grips over seaborne waste. This, together with weakness in copper prices, is likely to keep copper scrap spreads from widening, and further drive consumers to copper cathode.