An analysis by London-based Roskill shows China’s ability to consume metal continues unabated in 2020, but its inability to import copper-bearing scrap has caused a shift in its red metal trading patterns.
An Aug. 14 analysis by Jonathan Barnes of Roskill says the quick rebound in China’s infrastructure-driven economy after first-quarter COVID-19 impacts shows the nation is still hungry for metal, including copper.
However, the Chinese government’s strict quotas on copper scrap—followed by a delay in introducing a new scrap import system—has created a 300,000-metric-ton shortfall in copper units so far in 2020.
This “deficit in secondary supplies is one of the main factors explaining the 675,000-ton surge in Chinese refined imports to 2.6 million metric tons” in the first seven months of 2020, writes Barnes. He adds, “China has more than doubled its imports of secondary ingot to partially compensate for the halving of its scrap purchases.”
Continues Barnes, “To place this in its proper global context, China has imported more refined copper in the past two months than Germany – the world’s third-largest consumer – used in the whole of 2019.”
The Roskill analysts calls scrap the scrap “Achilles heel” of the global red metal supply chain, and its absence “has been instrumental in contributing to the incised V-shaped rebound in prices” for copper.
To some extent, China’s government seems to have acknowledged the difficulty with its scrap import bans, and has tentatively approved importing higher grades of red metal scrap to be considered as a “resource” rather than a “waste.”
However, the July 1 deadline for this new system has not been met, and now traders and recycling associations are reporting the Chinese government wants to first put in place a registration system for exporters before giving the green light to the new classification.Roskill is presenting a webinar on the copper market, with information on it available on this web page.
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