2010 Q3 China Copper Scrap Market Analysis

Analysis of price change tendency of copper scrap

In Q3 2010, China’s copper scrap price rebounded. Although the price dropped by 1.2%q-o-q, it rose by 22.07% y-o-y. In September,average price of copper scrap reached RMB 52350/ton.

In September, copper scrap price remained high and showed strong resilience, resulting in a widening gap of RMB 7050/ton at the height with electrolytic copper price, but market showed a light trading. On the one hand, most enterprises were not willing to purchase copper scrap in large quantities due to the oncoming Mid-Autumn Festival and the National Day Holiday in late September; on the other hand,many insiders are optimistic about copper scrap price, which much higher than that of electrolytic copper, therefore, suppliers tend to ask for a high price.

Between January and September 2010, China’s utilization of copper scrap stood at 1.77 million tons, an increase of 11.8% y-o-y; the supply stood at 1.617 million tons, an increase of 15.9% y-o-y, and the market faced a shortage of 153,000 tons.

Table 1 China’s Copper scrap Supply & Demand Table in Recent Years Unit: 10,000 tons

Between January and September 2010, China’s recycled copper scrap stood at 620,000 tons, an increase of 24.2% y-o-y. There are 2 reasons for this: firstly, in 2009, China made great investment in infrastructure and encouraged“trade-in” of home appliances and cars by means of financial subsidies. The above moves shortened lifetime of these products and improved recycling volume of copper scrap; secondly, since the whole industry of secondary metal has started to evolve from original capital accumulation to the new stage of industrial upgrade, workers’ income continuously improves,raw materials of copper in China are in short supply, copper scrap is in short supply due to rising copper price, dismantling enterprises adopt positive attitude.

According to statistics of China General Administration of Customs, between January and September 2010, China’s import volume of copper scrap totaled 3.216 million tons (material), an increase of 7.71% y-o-y. Although China carries out classified shipping management measures for import of copper scrap, the measures have increased import costs and lowered profitability of copper scrap, however. Between July and September, domestic import of copper scrap has maintained small growth for 3 consecutive months. In September, the import volume has reached 410,000 tons, the highest in 2010. Amongst copper import between January and September, 997,000 tons of copper have been recycled in foreign countries, therefore, domestic supply of copper scrap between January and September stood at 1.617 million tons.

In terms of import source of copper scrap, import volume from US increased remarkably between January and August 2010, an increase of 63.31% y-o-y, while import volume from Japan dropped by 72.32% y-o-y to 159,200 tons.

In terms of import of copper scrap (by area),between January and August 2010, Ningbo’s import volume shrank significantly, however,Taizhou saw a big increase of import volume;in Guangdong, except for Zhaoqing that experienced a significant increase and Foshan that saw a small increase, other major areas saw reduced import volume.

Table 2 Copper scrap Import of Key Areas in China (January-August, 2010)

During the first half of 2010, China’s copper scrap that has been used directly (copper content) stood at 557,000 tons, accounting for 31.47% of total utilization, with the proportion dropping y-o-y. There are 2 reasons for this:firstly, utilization volume of recycled copper grew faster than that of direct-used copper;secondly, in July 2010, frequent rains in South China remarkably reduced downstream demand and caused reduced volume of order for copper bar. Thirdly, the period between July and September is a peak season for power consumption, in order to ensure residents’ proper electric power utilization and realize the goal of energy conservation and emission reduction,Zhejiang and Jiangsu limited electric power use of high-consuming industrial enterprises, and copper processing enterprises of the provinces were forced to reduce production. It is said that implementation of the measure will more or less affect medium and small copper processing enterprises.

In 2010, China will increase its production capacity of blistered copper by 220,000 tons/year and its production capacity of refined copper by 690,000 tons/year. By the end of 2010, domestic total production capacity of blistered and refined copper will reach 3.47 million tons/year and 5.98 million tons/year respectively.

Due to China’s significant increase of copper production capacity, supply shortage of copper concentrate and low processing expense of imported ore, all copper smelting enterprises have increased purchase of copper scrap materials,and the proportion of copper scrap for smelting has been remarkably increased.