Secondary Copper Raw Material Shortage in the Spot Market: Will There Be a Turnaround in December?

According , the current supply of secondary copper raw materials in the spot market is relatively low, raising concerns about a supply deficit. So, will this situation improve in December? Here is  analysis of the current secondary copper raw material market and future trends.

Tight Supply of Imported Secondary Copper Raw Materials: In the overseas market, concerns about a US economic recession persist, leading to a continued tight supply of copper scrap. With falling copper prices, overseas suppliers stand firm on quotes. As of the week ending November 22, US secondary copper raw material prices remained unchanged, showing no significant volatility. Meanwhile, traders in the Ningbo spot market reported that due to tight supply, quotes for secondary copper raw materials remained firm. Since mid-November, the spot price of imported bare bright copper has consistently been quoted at Changjiang copper price minus 500 yuan/mt. Additionally,  has learned that customs clearance at Port Klang West in Malaysia has been stalled since September. Recently, scrap enterprises reported that due to the complete halt of customs operations, container clearance has been slow, and currently, import and export activities are at a standstill. As a result,  expects that Malaysia's exports of secondary copper raw materials to China will decrease in November and December.

The domestic secondary copper raw material market also shows signs of tight supply: According , the quantity of domestic secondary copper raw materials circulating in the spot market has been very low recently, with November circulation volume nearly 30% lower than October. Some secondary copper rod enterprises reported tight supply and significant difficulties in raw material procurement. This is mainly due to the impact of copper prices, which have fluctuated around 73,000-74,000 yuan/mt since mid-November, after once falling below 75,000 yuan/mt. According to secondary copper raw material suppliers, they prefer to hold onto their stock in anticipation of price increases, with some even choosing not to sell on certain days, waiting for copper prices to rise above 75,000 yuan/mt before they are willing to sell.

Future Outlook: The macro market in November has been relatively quiet, with significant wait-and-see sentiment among traders, leading to mediocre procurement activities. However, with December approaching and the year-end nearing, some enterprises and traders may increase their procurement volume to stockpile enough secondary copper raw materials to meet future production needs. If import traders increase their procurement of secondary copper raw materials, the tight supply situation may ease. Additionally, if copper prices rebound, suppliers' willingness to sell may also increase, further improving market supply conditions. However, attention should be paid to the impact of the Malaysian customs halt on the import volume of secondary copper raw materials. Moreover, there has been no public announcement of the specific duration of this customs halt.  will provide timely updates if there is any new information.

2.Significant Increase in Copper Rod Export Prices: Will Ordinary Trade Quotations Cease?

The export tax rebate policy stipulated in Announcement No. 15 of 2024 by the Ministry of Finance and the State Administration of Taxation is expected to be officially implemented on December 1. According to an  survey conducted two weeks before the official implementation, the processing fees for copper cathode rod exports (FOB) have significantly increased. Is this due to a rise in import profit/loss or a change in policy? The following is a detailed analysis.

According statistics, during the week of November 22, the lowest processing fee for 8mm copper cathode rod exports (FOB) was recorded at $154/mt, remaining unchanged WoW. The highest price was recorded at $218/mt, up $20/mt WoW. The average processing fees for 8mm copper cathode rod exports (FOB) increased by $10/mt, reaching $186/mt. The lowest processing fee for 2.6mm copper cathode rod exports (FOB) was recorded at $194/mt, remaining unchanged WoW. The highest price was recorded at $258/mt, up $20/mt WoW. The average processing fees for 2.6mm copper cathode rod exports (FOB) ultimately increased by $10/mt.

During the week of November 22, the lowest processing fee for copper cathode rod exports remained unchanged, mainly because some enterprises temporarily maintained their original quotation model under ordinary trade before the cancellation of the tax rebate policy. Additionally, due to direct exports by physical enterprises and adjustments in Yangshan copper premiums, the low price remained unchanged. However, major export enterprises in the market had already ceased quotations under ordinary trade last week. In the future, except for the long-term contracts not yet completed this year, all other orders will be converted to processing trade. Currently, quotations have been made for the model of processing with imported materials. Additionally, the rise in import profit/loss has also supported the current export prices for copper wire rod, leading to a significant increase in the high-end processing fees for copper cathode rod exports during the week.

According to an survey, major enterprises exporting copper wire rod plan to switch all current ordinary trade orders to processing trade in 2025. Whether the total export volume will significantly shrink in the future depends on the signing of export long-term contracts.  will continue to monitor this for you.

3. US Fed's December Rate Cut Remains Uncertain, Copper Prices Decline Again Overnight

LME copper opened at $9,019.5/mt overnight, initially rose slightly to $9,072.5/mt, then fluctuated downward, hitting a low of $8,950.5/mt near the close, and finally settled at $8,962.5/mt, down 0.9%. Trading volume reached 19,000 lots, and open interest was 269,000 lots. The most-traded SHFE copper 2501 contract opened at 74,020 yuan/mt overnight, initially peaked at 74,310 yuan/mt, then declined to a low of 73,670 yuan/mt during the session, and finally consolidated sideways to close at 73,760 yuan/mt, down 0.14%. Trading volume reached 29,000 lots, and open interest was 151,000 lots. Macro side, the US Fed's meeting minutes indicated that officials are inclined to cut interest rates gradually in the future, with some analysts already predicting a pause in rate cuts next month. Meanwhile, Trump promised to impose significant tariffs on Canada and Mexico. The US dollar index rebounded slightly, and all three major US stock indices closed higher, which was bearish for copper prices. Some analysts also noted that the inflation risk from the tariff hike could hinder the US Fed's rate cuts. Fundamentally, as trading shifted to cargoes with invoices dated next month yesterday, downstream buyers mostly sought cargoes with invoices dated this month. Some suppliers stood firm on quotes and were reluctant to sell, leading to overall poor market transactions. Recently, both imported and domestic copper arrivals in Guangdong have been low, and downstream orders in Guangdong have been strong, with some copper rod plants operating at full capacity. As a result, local inventories in Guangdong have almost depleted. Additionally, due to the still significant price spread between Shanghai and Guangdong, some east China cargoes are expected to move south, providing support for the bottom of the premiums. Price side, there remains significant macro uncertainty, and the market is awaiting more data from the US. Resistance to copper prices persists.

4.October 2024 Copper Plate/Sheet and Strip Imports Hit New High, Year-End Export Volume Expected to Increase

In October 2024, China's copper plate/sheet and strip imports hit a new high for the year, up 12.15% YoY and up 13.02% MoM. Cumulative imports from January-October 2024 increased by more than 20% YoY. From the import structure, China's copper plate/sheet and strip import growth remains concentrated in high-end copper semis, with limited growth in ordinary strips. High-end copper-tin alloy, copper-nickel-silicon alloy strips, or special coated and special-sized copper strips are the main contributors. In recent years, as the concentration of China's copper plate/sheet and strip industry has increased, the trend of product differentiation has become more apparent. From the growth in the share of copper plate/sheet and strip consumption in the transportation sector in 2024, future demand for high-end coated copper plates and strips is expected to continue growing.

On the export side, in October 2024, China's copper plate/sheet and strip exports increased by 32.48% YoY. By export destination, Japan, South Korea, and Southeast Asia showed significant growth, while exports to Europe declined due to logistics reasons. Emerging economies' demand for electricity, construction, and transportation sectors further expanded, and raw material demand increased due to the relocation of some domestic end-user factories.

Looking ahead, influenced by the new copper semis export policy, data shows that plate/sheet and strip enterprises still primarily use Ordinary Trade for exports. As a result, some plate/sheet and strip enterprises may export volumes in advance by year-end 2024. Additionally, the SHFE/LME price ratio opening up is expected to drive import demand. It is anticipated that copper plate/sheet and strip imports and exports will both increase MoM in November 2024.

5.China's Copper Cathode Imports Surge MoM and YoY in October, Non-Registered Share Declines

In October 2024, China imported 359,372 mt of copper cathode, up 11.4% MoM and 7.7% YoY, reaching the highest level of the year. The opening of the import window in September provided opportunities for October imports, but the share of non-registered imports declined to 57.37%. According to SMM data, in October, the import of non-registered copper cathode was 206,200 mt, with the main reduction compared to September coming from Russia and Kazakhstan.

From January to October 2024, the total import of non-registered copper cathode was 1.8583 million mt, accounting for 61.77% of the total copper cathode imports (3.0082 million mt). Excluding the registered brands from certain countries, the non-registered share is expected to remain above 50%.

On November 15, 2024, the Ministry of Finance and the State Administration of Taxation issued Announcement No. 15 of 2024, stating the following adjustments to the export tax rebate policy for products such as aluminum semis: 1. The export tax rebate for aluminum semis, copper semis, and chemically modified animal, vegetable, or microbial oils and fats will be canceled. 2. The export tax rebate rate for certain refined oil products, PV, batteries, and some non-metallic mineral products will be reduced from 13% to 9%. 3. This announcement will take effect on December 1, 2024. The applicable export tax rebate rate for the listed products will be determined by the export date indicated on the customs declaration form.

As the year-end copper cathode long-term contract negotiations are underway, the cancellation of the export tax rebate for copper semis is expected to affect the proportion of domestic and foreign long-term contracts signed by downstream enterprises in 2025. However, according to an SMM survey, this policy mainly impacts exports under the "Ordinary Trade" method and has little effect on companies with processing trade manuals. Additionally, with the industrial shift, many copper semis enterprises are expanding their overseas presence. Currently, overseas long-term contract prices are higher than the actual spot order levels in 2024, leading to low acceptance by domestic enterprises. It is expected that the import volume of non-registered sources will further increase in 2025.