Record Copper Prices Likely to Halt U.S. Scrap Shipments to China, According to Reuters

By Pratima Desai and Julian Luk

LONDON (Reuters) – China’s imports of scrap copper have surged due to a shortage of concentrate, which is essential for producing refined metal used in power and construction sectors. However, record-high prices suggest that shipments from the U.S. may soon be put on hold.

Chinese smelters, the largest consumers of copper, have been dealing with concentrate shortages since last year, particularly after First Quantum lost its operational rights to the Cobre mine in Panama, which accounted for 1% of global mined copper supply in 2022.

During the first four months of this year, China’s overall copper scrap imports increased by 25% to 783,004 tonnes compared to the same timeframe in 2022. Specifically, imports from the United States jumped by 37% to 153,059 tonnes.

The pricing for U.S. copper scrap is currently lower than the record CME price, which reached $5.1985 per pound or $11,460 per tonne on May 20, driven up by traders needing to cover futures positions.

According to a source from a Chinese trading firm, Chinese buyers have been delaying U.S. scrap shipments, despite the U.S. being China’s leading supplier of scrap. Some buyers are trying to price U.S. scrap using figures from the London Metal Exchange, which are trading at a discount compared to CME prices.

Concentrate shortages have been worsened by declining production in various Latin American mines, prompting Chinese smelters to increase their scrap imports to sustain operations and maintain profit margins.

China hosts half of the world’s copper smelters and is the largest consumer of raw materials, including concentrates and scrap. Scrap copper generally comprises around 9 million tonnes or approximately 30% of global copper supply annually.

Macquarie analyst Alice Fox noted that due to concentrate shortages, copper smelters are increasingly processing scrap and blister copper.

The analyst further commented that the costs associated with physical collection and processing mean that scrap tonnage can fluctuate significantly—by as much as one million tonnes annually—during periods of major price changes, effectively balancing the market in times of high or low prices.

Macquarie forecasts that the gap between supply and demand for copper will widen to 1.6 million tonnes by 2030, a significant increase from the current deficit of around 86,000 tonnes.