The Lisbon-based International Copper Study Group (ICSG), in its preliminary final data for 2020, has found that secondary copper production globally declined by 4.5 percent in 2020 compared with the year before. The ICSG cites “tight scrap supply” worldwide as one reason for the secondary output reduction in a year when overall refined copper output grew by 1.5 percent.
“Globally, constrained scrap supply due to the COVID-19 related lockdown and lower copper prices during the first half of the year negatively impacted world secondary refined production,” writes the ICSG in a two-page report summarizing its 2020 data.
The government of China also imposed a red metal scrap import quota system in the first 10 months of 2020, resulting in a situation where companies there that usually melt copper or brass scrap instead purchased secondary ingots or even primary cathode.
Despite the overall growth of refined copper output, less of the red metal was consumed in many parts of the world in 2020. Writes ICSG, “Copper usage was significantly impacted [by COVID-19 restrictions] and is estimated to have declined by about 10 percent. Among the biggest copper using regions, refined usage fell by 15 percent in Japan, 11 percent in the European Union, 5 percent in the United States and by about 10 percent in Asia (excluding China).”
China, meanwhile, increased its consumption of finished copper by 13 percent in 2020 compared with the year before, and upped its imports of refined copper by 38 percent (1.2 million metric tons).
In terms of global copper inventory at the end of February 2021, ICSG says copper held at the warehouses of major metal exchanges totaled more than 285,000 metric tons, a 13 percent increase over the inventory level at the end of 2020.
Inventories, though, actually have decreased by 10 percent at the COMEX warehouses and are 30 percent lower at London Metal Exchange (LME) warehouses. Contrarily, inventories at Shanghai Futures Exchange (SHFE) warehouses have increased by 97 percent in the first two months of this year.
In the red metal scrap sector, U.S. Census Bureau statistics collated by the U.S. Geological Survey (USGS) for the first 10 months of 2020 portray a potentially slight rebound in copper-bearing scrap exports from the U.S. to China compared with 2019. That also was a lackluster year for copper exports to China, with a quota system in place that lingered until November 2020.
The U.S. government figures also show the now prominent role of Malaysia as a red metal scrap destination. In 2019, Malaysia imported 221,300 metric tons of copper-bearing scrap from the U.S., far surpassing the 87,900 metric tons that flowed into Chinese ports.
In the first 10 months of 2020, Malaysia brought in 142,000 metric tons of copper scrap, putting it on pace to bring in just 170,000 metric tons for the year. That decline could serve to portray the struggles of processors and scrap consumers in Malaysia to find sufficient supply in the U.S.
For all of 2019 to all destinations, the U.S. shipped out 872,000 metric tons of red metal scrap. Based on a monthly average for the first 10 months of the year, that figure could fall to 770,000 metric tons in 2020, representing an 11.7 percent decline.