Copper at a Crossroads

A survey of the copper industry reveals geographical shifts in production and consumption.

The following article has been excerpted from a technical report produced in 2001 by the Copper Development Association Inc. (CDA), New York.

Rather than offering a look at where the market might be headed over the next six or 12 months, as Recycling Today commodity focus articles often do, it provides a look at how the copper market has evolved in the past decade, and how these changes have affected scrap recyclers.

Those interested in ordering the complete 72-page report, which includes production, consumption and import-export trading statistics, can reach the CDA through e-mail at The-Copper-Page@cda.copper.org or can visit the Publications List section of The Copper Page at www.copper.org.

Global Consumption and Production

Copper ranks third in world consumption of metals, after steel and aluminum. According to the International Copper Study Group (ICSG), refined copper consumption was 15 million tons in 2000.

The major refined copper consuming nations of the world were the U.S. (21 percent), China (10.8 percent) Japan (9.2 percent) and Germany (8 percent), with China surpassing Japan in 1998. Although world refined copper consumption has increased by 31.7 percent between 1994 and 2000, the higher rate of new copper production (a 34 percent increase) has resulted in market surpluses, largely owing to significant new mine capacity that came on stream over the past four years.

World copper prices have steadily decreased since 1995 and in 1999 reached levels not seen since the early 1980s. Although the average price of copper was 82 cents in 2000 — 10 cents higher than in 1999 — it sank back down in 2001. As a result, copper scrap has been scarce in most world markets over the past four years.

A reasonable spread in price must be present between the current refined copper price and that for purchased scrap in order for processing to be profitable. The price spreads between No.2 scrap and refined copper are lower in coincidence to the decreasing refined copper price in recent years.

For example, the U.S. price spread was as high as 32 cents in 1995, but reached about one-half that amount during 1998 and 1999 and was similar in range to that experienced during the recession of 1982 to 1984. With increasingly stringent environmental regulations and requirements, the costs to process scrap at all levels, from low-grade to pure-metal, have escalated. This current cost squeeze has caused many secondary processors to re-think doing business.

The U.S. (19 percent of all world copper recovered from scrap in 2000) remains the largest copper-base-scrap-consuming nation in the world. However, the Western European countries (35 percent) make up the largest single market for copper-base scrap in the world. Germany, Italy, France and the United Kingdom are the leading consumers of copper scrap in Western Europe.

Asia (including the Middle East; 32 percent) forms the second largest copper-base-scrap-consuming region of the world, led by Japan (15 percent), mainland China (9 percent) and South Korea (7 percent). Scrap consumption in Asia has grown from about 723,000 tons in 1980 to 2.4 million tons in 1995, but during an industrial contraction, experienced a 12 percent drop to around 2 million tons in 1997. America (24 percent) is the third largest copper-scrap-consuming region after Europe and Asia.

Consumption figures may have changed dramatically in 2001, with China growing rapidly as a consumer of scrap copper in particular.

The U.S. (13 percent of world copper-base scrap exports in 1999) is the largest exporter of copper scrap. Russia’s (8 percent) exports of copper-base scrap also increased three-fold between 1993 and 1998, but have since dropped sharply. Germany (11 percent), France (8 percent), Mexico (5 percent) and the United Kingdom (4 percent) are also large exporters of copper-base scrap.

World imports of copper-base scrap more than doubled from 1989 to 1999 in response to the significant industrial growth in the Far East and Europe. China, including Hong Kong and Taiwan, was the largest recipient of U.S. scrap during the 1990s.

About 75 percent of the copper consumed in the U.S. is for electrical and electronic uses, finding widespread application in all end use sectors of the economy. According to the CDA, 4 million metric tons of copper and copper alloy mill products were consumed in 1998 end-use markets as follows (electrical is distributed through all end-use markets): Building Construction (41.1 percent), Electrical and Electronic Products (26.8 percent), Industrial Machinery and Equipment (11.1 percent), Transportation Equipment (11.3 percent) and Consumer and General Products (9.7 percent). Copper powder and chemical industries are important markets, though smaller in total tonnage.

Domestic Copper Consumption

The U.S. consumes copper derived from primary and scrap copper. Copper may be derived from either refined or direct melt copper and copper alloy scrap. The industrial sector of the U.S. consumed more than 3 million tons of refined copper in 2000, according to the U.S. Geological Survey (USGS), Reston, Va.

Only 216,000 tons (or 7 percent) was derived from scrap in 2000, much lower than the 480,000 tons (22 percent) of copper from refined scrap in 1989. In addition, the U.S. consumed about 1 million tons of copper in 2000 derived from 1.3 million tons of direct melt copper containing scrap.

The range in annual average copper content for direct melt scrap in the U.S. has been 83 percent to 85 percent of the gross weight over the past 10 years. Total copper from scrap (refined plus direct melt and other than copper-base scrap) amounted to about 1.3 million tons. Copper from old and new copper-base and other scrap was valued at $1.5 billion and made up 33 percent of total U.S. copper consumption.

Old scrap recycling and its contribution to U.S.-refined copper production has fallen in recent years, despite a rise in total U.S. copper consumption. U.S. recovery and consumption of "old" scrap was highest in 1979 and 1980, years of high copper demand and high prices. As a percent of total copper consumed, scrap consumption has declined from 49 percent since the early 1980s to around 33 percent in 2000.

Seventy-five percent of copper from scrap refining was derived from old scrap sources in 1999. Ingotmaking also consumes large quantities of old scrap (73 percent in 1999). Old scrap copper recovery in the U.S. is largely related to variability in copper price, supply of primary copper and domestic industry demand.

The closure of several U.S. copper scrap smelting and refining plants and ingot makers, owing to higher costs associated with tight environmental and safety standards, is exacerbating the decline in collection and processing of old and low-grade scrap in the U.S.

Global Scrap Consumption

U.S.-derived copper and copper alloy scrap of all types has significant intrinsic value to the U.S. and global manufacturing industries.

The U.S. is a larger exporter of copper and copper alloy scrap. The most significant U.S. scrap export destinations are in Western Europe and Asia. The U.S. also imports scrap. The most important sources for U.S. copper and copper alloy scrap imports are Canada and Mexico. Scrap exports generally have been increasing since the early 1970s, reaching peaks in 1989, 1995 and again in 2000.

U.S. scrap imports and exports were down significantly in 1998 and 1999, as a result of the worldwide depressed prices for copper and the strong U.S. dollar. The lower scrap price and stronger dollar combined to make U.S. scrap scarce for domestic buyers and expensive for foreign buyers.

Primary copper at bargain prices is making a ready substitute for those who can use it. However, owing to the types of furnaces used, size of charge needed and chemical requirements for certain alloys, this is not possible for all secondary metal users, and the market has become difficult for these industries.

The trend in U.S. net scrap exports appears as a mirror image to the trend of copper recovered from refining scrap. When refining from scrap (largely old scrap) is high, net exports (exports less imports) are lower. Lower exports and higher imports of scrap in the early 1980s were owed in part to the stronger dollar of the period.

Remaining U.S. Consumers

The largest brass mills are located in Missouri and Ohio. Pennsylvania has eight brass mills; Ohio and Connecticut have five; Illinois, four; and Michigan, three. Several other states have one or two brass mills.

Foundries are mostly small, family-owned operations near major industrial centers, such as those in Illinois, Alabama and Indiana.

According to the USGS, in 1998 the foundry industry processed about 58,100 tons of purchased copper and copper alloy scrap. However, most foundries do not have the capability to perform smelting, refining and chemical analysis of purchased scrap. Therefore, large quantities of scrap cannot be used, and the purchase of ingot with a known chemistry is necessary. Some foundries, however, do prefer some types of scrap, such as No. 1 chopped wire because of its small size and easy melting. In effect, foundries are re-melters and producers of engineering shapes.

Ingot plants produce a wide variety of copper and copper alloy and master alloy ingot for foundry, brass mill and other industry consumption. They purchase a large proportion of the "old" copper and copper alloy scrap collected each year.

There are about 23 currently operating ingot makers, down from the 28 counted in 1991. These are concentrated near the industrial centers of Chicago, Los Angeles and the eastern U.S. Ingot makers are consumers of a variety of copper and copper alloy materials and other metals. Most U.S. ingot makers are independent, largely family-owned and operated businesses.

Hydrometallurgical plants use a variety of byproducts, including circuit board scrap and bimetallics, to make cupric oxide, copper sulfate and copper carbonate.