Year-End Volatility in the Copper Scrap Market: The Supply-Demand Dilemma Amid High-Price Suppression and Policy Uncertainty

The copper scrap market experienced a retreat after a rapid rise following record-high copper prices this week, with overall trading remaining sluggish. At the beginning of the week, copper prices climbed to 98,800 yuan/mt, an increase of 740 yuan/mt, and the price of bare bright copper in Guangdong followed suit, rising to 87,000 yuan/mt, with a weekly gain of 1,400 yuan/mt. The price difference between primary metal and scrap widened to 5,225 yuan/mt, theoretically indicating a significant economic advantage for secondary copper, but actual demand did not follow suit. Overseas markets stalled due to the Christmas and New Year holidays, halting the trade of imported recycled copper raw materials. Domestic enterprises, affected by high copper prices and year-end financial settlement pressures, generally adopted a strategy of deferring demand, leading to a supply-demand contradiction characterized by ample supply but lagging demand. Despite the price difference between copper cathode rod and secondary copper rod widening to 3,190 yuan/mt, the purchase willingness of secondary copper rod enterprises remained low, with most choosing to wait and delay restocking until after the New Year.

As market sentiment shifted mid-week, copper prices pulled back 3,370 yuan/mt to 98,360 yuan/mt, and the price of recycled copper raw materials fell 2,400 yuan/mt, with the price of bare bright copper in Guangdong retreating to the 85,500-85,700 yuan/mt range. The price difference between primary metal and scrap narrowed to 3,495 yuan/mt, down 1,730 yuan/mt WoW. Although suppliers actively lowered their quotes, secondary copper rod enterprises did not rush to buy, instead further postponing their restocking plans. The price difference between copper cathode rod and secondary copper rod contracted to 1,745 yuan/mt, indicating that the decline in finished products was more pronounced than in raw materials. Although some secondary copper rod enterprises received orders after the price adjustment, many delayed their delivery schedules to after the holiday, further exacerbating the decline in market activity.

On the supply and demand front, the copper scrap market faced structural pressures. Supply was temporarily loose due to overseas holidays, but domestic demand was constrained by multiple factors. According to SMM data, the operating rate of secondary copper rod enterprises this week was 14.71%, up 1.19% WoW but down 13.52 percentage points YoY. The average price difference between copper cathode rod and secondary copper rod was 2,342 yuan/mt, basically flat MoM. The average minus against futures for secondary copper rod in Jiangxi narrowed to 2,163 yuan/mt, down 33 yuan/mt WoW. However, the gross profit margin on sales of secondary copper rod increased 422 yuan/mt MoM to 1,618 yuan/mt, reflecting the enterprises' ability to balance cost control and price adjustments. Policy uncertainty became a key factor suppressing market vitality, with tax authorities' scrutiny of the authenticity of reverse invoicing practices increasing compliance pressure on enterprises. The expectation of potential cancellation of local subsidy policies kept most secondary copper rod enterprises in a state of suspended operations and observation. Looking ahead to next week, market focus will center on the interplay between post-New Year policy adjustments and copper price trends. If local subsidy policies are officially canceled and copper prices continue to fluctuate at highs, the operating rate of secondary copper rod enterprises may remain low. In the short term, restocking demand after the holiday could see a slight release, but under the pressure of high copper prices and policy uncertainties, the market recovery is expected to be limited. The operating rate of secondary copper rod is projected to fluctuate at lows with narrowing price volatility, until sellers and buyers find a new supply-demand equilibrium once policies become clearer.