As copper prices kept dropping amid uncertain risks overseas and the weak Chinese economic recovery, copper scrap suppliers became less willing to ship cargo in May. The market thus saw a sharp decline in scrap supply. The price spread between the copper cathode and copper scrap hovered around the advantageous level for users and dipped to a low of 561 yuan/mt, which depressed copper scrap consumption. Most of the copper rod factories using copper scrap shut down in May due to difficulties in purchasing copper scrap.
According to SMM statistics, the domestic secondary copper and copper ingot smelting volume was 125,000 mt in May 2023, down 8,000 mt month-on-month. When prices fluctuate at low levels, there are regional differences in the supply of copper scrap. Since copper scrap in Zhejiang and Guangdong are mostly imported copper scrap, most suppliers will use hedging for risk control. Therefore, when copper prices run at a low level, the supply of copper scrap in Guangdong and Zhejiang is slightly looser than other inland regions such as Tianjin and Hebei.
According to customs data, China’s copper scrap imports stood at 145,400 mt in physical content in April, down 18.14% MoM and up 7.42% YoY, because the companies were bearish on the end demand. SMM presumes that in the near term, copper scrap imports will still decrease due to poor end consumption, even though the import losses have shrunk in the past two months.
Copper prices rebounded on the back of positive macro sentiment in June. And copper scrap suppliers sold at highs, growing supply. Copper scrap supply tightness will thus ease in June compared to May.
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