ISRI Convention: Copper Challenges

Many eyes are on China’s future demand for red metal scrap.

April 30, 2013
Recycling Today Staff

Trying to understand the volatile copper market and where it is headed was the focus of a Copper
Spotlight at the 2013 Institute of Scrap Recycling Industries (ISRI) Convention & Exposition, held April 9-13 at the Orlando County Convention Center in Orlando, Fla.

A major emphasis of the spotlight session was the changing role of China in the copper market.
During the session, Carlos Risopatron, a spokesman for the International Copper Study Group, highlighted the growth in global copper mining.

Following a look at the global copper market, Bob Stein with Alter Trading Co., a St. Louis-based scrap metal recycler, focused his presentation on the export market for copper scrap with a special emphasis on China. In his remarks, cautioned attendees that the export market for copper was quite complicated.
Drawing a comparison to playing a new game at an arcade, Stein said, “If you don’t understand the game, ask the clerk. If you still don’t understand the game, don’t play.”

While the Chinese market offers monthly swings in demand, Stein took a longer-term look at China’s role as the de facto export market for copper scrap. He said despite China’s huge appetite for copper scrap at the present time, the explosive growth in demand for copper scrap by China has peaked. “I believe the enormous appetite for copper scrap to China has reached its zenith,” Stein said. While the country will continue to play a major role, he noted that China “as a market option will decline over time to the point where it will join other importers as a mature, steady customer of scrap.”

One reason is that China is using greater amounts of copper concentrate rather than copper scrap. Along with a shift toward concentrate and cathode, China also will become more reliant on its steadily growing domestic copper supply to feed its needs, Stein noted. The net result is that scrap exporters will have to shift more of their product toward other possible end markets.

Another factors shaping China’s buying patterns is stricter regulations increasing the cost of doing business with China. China has a duty to protect its sovereign rights to ensure the safety and compliance of material being shipped to the country, Stein noted. While this can be a good thing, “the costs to do this are high,” he added.

Another factor playing a role in China’s copper scrap buying is increased labor costs. Stein, as well as Adam Minter, another presenter at the copper spotlight session, said labor costs are steadily increasing, reversing a former perception that labor costs would always make shipping to China a cost-effective option.

Stein also pointed to the vast stocks of copper reportedly being housed throughout China. “The massive stocks of copper held in China are an overhang that can’t be ignored,” he stated. Much of this metal is used as collateral for other projects. If this continues, Stein added, it could compromise the market.

Minter, a freelance author and journalist who resides in China, dispelled what he called ideas that have been accepted by exporters. Cheap labor, Minter agreed, is going by the wayside. As a result of inflation, mechanization is becoming more important. Minter also said environmental pressures continue to drive changes in the import of copper scrap (as well as other materials) to the country.

While some analysts of China’s economy look at the country’s housing sector as indicative of a bubble, Minter said there is a cultural philosophy skewed toward home ownership that will keep housing markets from collapsing.

Minter expressed bullishness about China’s economy and the impact it will have on recyclables. As for the slowdown in infrastructure spending in China, Minter said this trend will reverse this summer as the new Chinese leadership starts to exert its presence. Prior to that, many officials have taken a “wait and see” approach to spending money. Minter said, however, that the Central Committee is looking to possibly invest $6 trillion to continue the nation’s urbanization strategy.

The 2014 ISRI Convention & Exposition will be April 6-10 at the Mandalay Bay Resort and Casino in Las Vegas.