SHANGHAI, Jul 3 (SMM) – Copper scrap consumption by Chinese processors extended its decline in May, as rod producers with copper scrap as feedstock continued to cut operating rates on waning appeal of copper scrap.
SMM data showed that copper rod producers contributed to over 60% of the scrap consumption on the processing end in May.
Copper scrap consumption across Chinese processors came in at 92,600 mt in May, down 14,600 mt from April. Consumption by smelters, however, improved from April, and this buoyed overall consumption of copper scrap by 1.09%, or 2,100 mt on the month, to 190,900 mt in May.
In May, copper scrap consumed by processors accounted for 48.52% of the total, while the amount used by smelters took up 51.48%. About 60.7%, or 115,900 of copper scrap consumed in May were imported, higher than a proportion of 59.77% in April.
An SMM survey showed that the average operating rates across scrap-using copper rod producers in China lost 12.54 percentage points from April, to 54.44% in May. The monthly decline accelerated from a drop of 4.27 percentage points in April.
The appeal of copper scrap-made rod among Chinese consumers further ebbed in May as a shortage of copper scrap amid import restrictions continued to hike the scrap prices. This, together with intensified US-China trade dispute in May and value-added tax cuts since April that drove down copper prices, cut discounts of scrap against refined copper, and drove consumers to the copper cathode.
The price spread between refined, scrap copper averaged 831 yuan/mt for May, down as much as 257 yuan/mt from April, SMM assessed.
As of Wednesday July 3, trades of copper scrap remained thin as sellers held from offloading cargoes even as easing trade tensions between China and the US rallied copper prices and widened the discounts of scrap materials.
Imports of copper scrap in May stood at 155,981 mt in Cu content, expanding some 31.76% year on year, but imports in physical volumes declined 24.37% on the year, according to SMM calculations based on customs data.
On a yearly basis, imports in January-May jumped 12.94%, standing at 581,558 mt in Cu content, driven by import rush before the restriction on Category Six copper scrap on July 1.
Environment ministry has so far issued 240,429 mt of quotas for the imports of Category Six materials, and the second batch of approval is likely to be released around July 10, a source told SMM.
SMM expects the import quotas for the third quarter to remain stable from a year ago, but approved volume to shrink for the fourth quarter.