Copper Scrap Industry Remained in Cold Winter



Copper Scrap Industry Remained in Cold Winter

Beginning from 2012, domestic copper scrap enterprises entered “winter” period, this year the situation further worsened. According to survey, most medium to small sized copper scrap trading enterprises have either closed down, transferred to other businesses, or reduced trading volume, though large trading enterprises are still eking out a living, the profit is meagre.

Import volume of copper scrap began to decline since 2012. According to data, from January to September this year domestic import volume of copper scrap dropped for the fourth consecutive year to 2.68 million tonnes, down by 6.09% on Y-o-Y basis, but the margin narrowed compared with 10.54% decline last year.

Key reasons leading to downturn in copper scrap industry include the following several aspects:

1. Copper price began one-way decline since 2011, in the second half of this year domestic spot copper price mostly stayed below 40000 yuan/tonne, domestic copper scrap price approached electrolytic copper price, cost advantage of copper scrap for smelting enterprises weakened. Usage rate of copper scrap in smelting factories is steadily dwindling.

2. For a long time copper scrap prices inside and outside China remained in inverse status, which made the advantage of copper scrap import no longer evident, especially for high grade red copper.

3. Combined environmental protection measures aggravated declining speed in the copper scrap industry. In June 2014, the Ministry of Environmental Protection announced “Pollution discharge standard for secondary nonferrous metals industry”, which put forward unequivocal and specific requirements for further standardizing pollutant discharge by secondary copper smelting enterprises. This year, rectification efforts for environmental protection inside China intensified, in particular before and after the “Parade Blue” period, copper scrap smelting factories in North China were nearly all shut down.

4. Chinese economy slowed down in growth, the growth of copper scrap import volume experienced pressure. In recent years, the growth of fixed asset investment presented steady decline trend, the weakening of domestic demand is also one factor leading to decrease in copper scrap import.

5. Banks are cautious and stringent in granting loans to nonferrous metals industry, capital pressure dragged down copper scrap import volume. In the import trading of copper scrap, TT is the dominant payment method, which means greater demand for cash in the copper scrap trading process.

6. Decrease in European and American supply, diversion of import to emerging countries. European and American region account for 50% above in China’s copper scrap import volume, due to growth slowdown of the two big developed economies, the progress in product upgrading & replacement also slowed down, which reduced the output of copper scrap. On the other hand, China’s surrounding countries, such as India, Japan, and South Korea, have low threshold for importing copper scrap, government support effort is forceful, which expanded their international competition advantages, and increased the difficulty of importing copper scrap by China.

Against the background of no significant improvement in domestic and overseas demand in the short term, and copper price still lingering in weak situation, the “spring” of copper scrap will arrive quickly. Nevertheless, as the environmental rectification of domestic copper scrap enterprises is coming to an end, the decline speed of copper scrap import may slow down.