China Expects to Boost Scrap Copper Purchases

Copper scrap supply will tighten towards the end of the year as buyers in China, the world's second largest consumer of scrap metal, return in force to the global market, industry sources said, Reuters reports.

They said clearer legislation regarding scrap imports to China, and the rundown of stocks in the country's ports and yards, would prompt consumers to step up purchases from key suppliers in Europe and the US from next month.

"There's still considerable reluctance for people to commit to new purchases of copper scrap at this moment. When the demand side is sorted out, things will tighten up again quite rapidly," said Michael Lion, an exclusive consultant to Sims Group, the world's largest recycling firm.

China's appetite for copper scrap to feed its fast-growing metals sector has sucked up much of world supply.

But imports stalled from May, after Beijing imposed lending curbs to cool an economy that grew 9.7 percent in the first half of the year.

"Most of the scrap has been cleared, and the Chinese haven't come back very aggressively into the market," a Shanghai-based trader said.

July import figures showed China's imports from Japan and South Korea were already picking up again, but traders said most of this material was low-grade scrap found in wire, cable and small motors and containing less than 80 percent metal.

"An increasing amount of copper cable scrap is being sent to China, where it can be stripped at much lower labor costs than in Korea," a cable maker in Seoul said.

Chinese importers were also expecting clearer direction on customs duties, officials said. Many had been deterred from buying new cargoes by the stricter interpretation of duties by individual ports, which in many cases had added to actual import costs.

"It's causing a lot of pain and chaos in the market place, as far as importers are concerned, because they can't get a feel for what they're going to have to pay out in duties," Lion said.

China imposes an 11 percent duty on copper scrap imports, although countries with 'most-favored nation' status - World Trade Organisation members, said a customs official - pay only 1.5 percent.

Imports from Hong Kong, destined mainly for shipment up the Pearl River estuary to ports in southern China, almost halved year-on-year in the seven months to July.

Officials said this was due partly to Beijing's stricter regulation of customs duties in an attempt to spread copper supply more evenly throughout the country and weed out irregularities in import charges.

China imported 2.08 million metric tons of copper scrap in the seven months to July 2004, or 12 percent more than in the same year-earlier period, official customs data showed.

Japan, the largest single supplier, shipped 915,294 metric tons in the period, or 25.7 percent more year-on-year.

Its deliveries in July alone were higher than in either May or June. South Korean shipments were up nearly 40 percent year-on-year and in July alone were almost double what they were in May.

However, China's imports from its second-largest supplier, the United States, were down 8 percent for the seven months.

And, although shipments from Belgium more than doubled in the same period, deliveries in July were lower than in May or June.

Traders said an increase in demand from other parts of the world, including Europe and the U.S., had accounted for any excess copper from China's temporary slowdown in consumption.

High-quality Birch/Cliff copper scrap was trading in a wide range at around $2,500 a metric ton, traders said, and had shown limited response to sharp movements in the three-month copper prices on the London Metal Exchange and COMEX markets.

"The underlying factor in price is rumor and counter-rumor as it applies specifically to copper scrap," Lion said. Lloyds List