In August 2026, the price difference between primary metal and scrap widened from 3,455 yuan/mt at the beginning of the month to above 5,000 yuan/mt by month-end, reaching a historical extreme range. On August 17, it shot up to 5,533 yuan/mt. The price difference between copper cathode rod and secondary copper rod also fluctuated at highs in the 1,150-2,260 yuan/mt range. On paper, the substitution advantage of copper scrap over copper cathode reached an unprecedented level. However, in sharp contrast to this "golden spread," spot copper scrap transactions failed to pick up volume throughout the month. The market exhibited a distorted pattern of "high spreads, low transaction volumes, and strong invoice constraints." The core contradiction has shifted completely from the "copper price level" seen at end-July to a dual squeeze of "invoice costs eroding spread benefits and physical demand suppressed by high copper prices."
Supply side, the underlying constraint in the copper scrap market remains the combined impact of the reverse invoicing policy and the scarcity of tax-inclusive invoices. SMM data shows that tax-inclusive invoice tax rates for secondary copper raw materials across regions have climbed from 10.5% to 11.5%-12%, with Guangdong even reaching 12%. Domestic tax-inclusive copper scrap supply is scarce, and enterprises competing for input invoices have kept compliant supply tight. The rapid expansion of the price difference between primary metal and scrap this round was not driven by demand, but rather by tax costs being passed upstream along the industry chain to copper scrap raw material suppliers. With intense competition in the secondary copper rod finished product segment making price increases impossible, scrap utilization enterprises could only pass on the additional costs from higher invoice tax rates upstream by depressing tax-exclusive copper scrap purchase prices. As a result, tax-exclusive copper scrap prices consistently lagged copper cathode gains. Suppliers' selling pace amid wild swings in copper prices showed a typical pattern of "selling into rallies and holding back from selling on dips."
On the import side, China's copper scrap imports in July reached 219,100 mt, up 3.89% MoM. The modest increase was mainly due to tight domestic spot copper cathode supply, which raised enterprises' reliance on copper scrap. Copper prices continued to shoot up in July, with most downstream enterprises still making just-in-time procurement and orders performing modestly. Entering August, affected by copper prices staying high and the off-season, copper scrap imports are expected to pull back slightly MoM. On the price front, with current inventory tight and spot premiums for copper cathode staying high, payable indicators for ex-China copper scrap remain elevated, and suppliers hold prices firm with strong sentiment. Although end-use demand has yet to show clear improvement, against the backdrop of persistently tight domestic invoice supply and limited tax-inclusive cargoes, tax-inclusive copper scrap prices are expected to stay high. Demand side, secondary copper rod enterprises at the processing segment indicated that with the price difference between copper cathode rod and secondary copper rod widening, end-user wire and cable companies placed orders actively and traders accelerated cargo pick-up. With ample orders, secondary copper rod enterprises urgently needed to replenish raw material inventory, and purchasing activity picked up noticeably. The market shifted from "suppliers selling while rod enterprises wait and see" to active trading characterized by "suppliers selling while rod enterprises scramble for goods." On the smelting side, enterprises producing anode plates from scrap maintained low operating rates due to shortages of tax-inclusive raw materials. Blister copper RCs hovered at the year's low of 600-800 yuan/mt, and long-term contract delivery volumes were expected to contract, further confirming that the shortage of tax-inclusive supply is squeezing the entire scrap utilization industry.
Overall, after the invoice tax rate for tax-inclusive copper scrap rose to 12% in August, the actual landed costs for scrap utilization enterprises did not decline correspondingly, and the price spread dividend was eroded by tax costs. Meanwhile, under expectations for the traditional September-October peak season, end-user wire and cable enterprises remained reluctant to purchase due to persistently high copper prices, and pre-season stockpiling had not yet substantively begun. Looking ahead to September, as short-squeeze activity recedes and copper prices retreat from highs, if the tax-inclusive invoice tax rate remains elevated at 12% and copper prices continue to hold above 107,000 yuan/mt, the copper scrap market will likely remain in a high-level stalemate characterized by "suppliers holding prices firm while demand stays on the sidelines." A genuine recovery in physical consumption will require copper prices to pull back to downstream psychological price levels, or a substantial decline in invoice costs to rebuild reasonable profit margins for rod enterprises. Otherwise, the "inflated" price difference between primary metal and scrap will persist, and the substitution of copper cathode by copper scrap will remain constrained in its release.
