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CHINA STOCKPILES THREATEN COPPER PRICE SURGE

By BUUMBA CHIMBULU

CHINA’S scrap rebalancing act threatens to derail the recovery of copper prices as the country during the first half of this year is already averaging 137,000 tonnes per month.

According to an analysis report, China imported 821,000 tonnes of copper-based scrap in gross weight terms during the first six months, a 390,000 tonnes or 91 percent surge compared with the 431,000 tonnes of imports a year earlier.

Surging Chinese scrap copper imports that have doubled in the first half of 2021 are displacing to some extent refined cathode, concentrate, anode and blister imports, with the Roskill report predicting the situation to worsen and potentially cripple the copper price recovery.
Copper prices rose to their highest in nearly six weeks on Monday, as investors left a subdued equities market for more attractive assets and as floods in China sparked supply concerns.

Three-month copper on the London Metal Exchange increased 1.2 percent to US$9,632 a tonne , after rising as much as 1.6 percent earlier in the session to US$9,665 a tonne, its highest since June 16

According to Roskill, scrap supply was a complex function of price, generation, recovery rates and international logistics and an ultimate price adjustment mechanism for the copper market.

The report stated that what happened to Chinese scrap imports in the second half of 2021 may do much to dictate what happens to copper prices over the balance of this year.

“With first half of 2021 already averaging 137,000 tonnes per month, and with some sequential improvements in global scrap availability still feeding through, Roskill concludes there is every likelihood that they could average 146,000 tonnes per month in H2 2021,” the analyst stated.

This, according to the report, would be enough to boost China’s annual scrap imports up from 944,000 tonnes in 2020 to 1.7 million tonnes in 2021, a 756,000 tonne, or an 80 percent surge.

“In copper content terms, this would theoretically be 680,000 tonnes, or 91 percent rise. With 60 percent of scrap supply in China going to fabricators, and just 40 percent to smelters and refiners.

“This could potentially result in 400,000 tonne hit to Chinese refined demand this year, as fabricators replace expensive refined copper cathodes with cheaper scrap,” according to the report.

This, the report stated, would unquestionably result in a decline in Chinese refined consumption in 2021, hugely negative factor for world copper prices to surmount, despite the evident recovery in demand in the rest of world.

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