No greenlight for red metals quite yet

China, the world’s largest consumer of red metals, originally indicated it would allow high-quality nonferrous scrap imports to enter the country in July without being subject to quotas. That deadline came and went, however, without the change being implemented. Traders and recycling associations are reporting that the Chinese government wants to establish a registration system for exporters before giving the go-ahead to the new classification system.

The Beijing-based China Nonferrous Metals Industry Association Recycling Metal Branch (CMRA) has notified overseas traders that they have until Sept. 3 to apply for what it describes as a no-cost qualification certificate to ship high-grade copper and aluminum scrap grades to China under its new system.

The request for information involves paper and electronic forms and appears to be similar to the type and quantity of information overseas companies have submitted for General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) licensing under the prior import system.

On a question-and-answer page (in Chinese) on its website, CMRA says the registration information is not mandatory but that “qualified overseas suppliers will [have] priority for preshipment inspection.”

The China Inspection Group will remain involved in the scrap exporting process, as it was under the AQSIQ regimen, according to the same Q&A page. However, “Companies that already have AQSIQ certificates still need to reapply” for the new certificate, CMRA writes.

“To place this in its proper global context, China has imported more refined copper in the past two months than Germany—the world’s third-largest consumer—used in the whole of 2019.” – Jonathan Barnes of Roskill

An analysis by London-based Roskill shows China’s inability to import copper-bearing scrap as a result of its current quota system and policies has caused a shift in its red metal trading patterns.

An Aug. 14 analysis by Jonathan Barnes of Roskill says the quick rebound in China’s infrastructure-driven economy after first-quarter COVID-19 impacts shows the nation is still hungry for metal.

However, the Chinese government’s strict quotas on copper scrap—followed by a delay in introducing the new scrap import system—has created a 300,000-metric-ton shortfall in copper units so far in 2020.

This “deficit in secondary supplies is one of the main factors explaining the 675,000-ton surge in Chinese refined imports to 2.6 million metric tons” in the first seven months of 2020, Barnes writes. He continues, “China has more than doubled its imports of secondary ingot to partially compensate for the halving of its scrap purchases.

“To place this in its proper global context, China has imported more refined copper in the past two months than Germany—the world’s third-largest consumer—used in the whole of 2019,” he adds.

The Roskill analyst says the lack of scrap “has been instrumental in contributing to the incised V-shaped rebound in prices” for copper.

While U.S. sources say retail and industrial nonferrous scrap flows have improved, industrial generation remains off by 15 to 20 percent compared with prepandemic levels.

A trader with a Midwest-based scrap processing firm says copper spreads have begun to widen as of early August, though they remained relatively consistent as the COMEX price rebounded earlier in the pandemic. He adds that was something of an anomaly as spreads typically would widen.

The trader adds, “The market came all the way back really, really fast.”