Scrap copper prices are at an all-time high following demand from imported scrap.
Here we breakdown key factors that have influenced rising prices, whether scrap copper prices will continue to increase, and if the recent trend in rising scrap copper prices is soon to end.
Demand for copper has increased over the past year. Rates are at an all-time high as demand for EV production, infrastructure, and other technological industries increases.
With many countries now focusing on reducing crude scrap copper production following environmental concerns, the demand for scrap metal and scrap copper in particular is expected to stay strong. However, this could change as many recover post-pandemic!
Floods in China have led to supply concerns and demand for damaged infrastructure.
It is estimated that the flooding in China has led to costs of over 10 billion.
With market pricing being affected by the recent floods, disruption to output in the Henan province and transport city of Zhengzhou shows strong demand for materials.
With a reduction in crude copper production, the use of scrap copper is predicted to support demand in East Asia as part of a long-term Covid recovery stimulus plan.
The UK’s scrap use is also set to increase following a scrap ban lifted from China. There’s been a push to use scrap material rather than raw, crude production methods.
UK scrap metal imports have increased massively since June last year.
Although the UK is the largest exporter of scrap (mainly steel) across 28 countries that make-up the European Union, overall scrap use has dropped by 14% since 2019.
Despite this, imports from the UK have continued to grow since the first arrival in May. Imports grew seven-fold to 1,700 in June following an end to the scrap ban by China in January.
With a push on using more scrap metal as opposed to the normal damage of mining raw materials, scrap metal and scrap copper use is expected to increase following supply and demand post-pandemic.
Raw production of copper went down massively during the pandemic as rising infection rates and staff shortages led to reduced mining output.
Peru, a leading copper producer, saw its production of copper go down by 12.5% to 2.15 tonnes in 2020 as coronavirus restrictions reduced output. This was concerning for major economies like China. As the world’s largest importer of red metal China relies heavily on metal for infrastructure and industry use.
Following reductions in output, China’s part in their metal stimulus plan has reportedly stockpiled on raw material, which will increase the price of copper, whilst putting reliance on domestic scrap as regulations have been relaxed.
Recently, copper prices have been increasing as China has been releasing fewer metal reserves than predicted.
China is looking to sell another 30,000 tonnes of copper, 90,000 tonnes of aluminium, and 50,000 tonnes of zinc at auction from its state reserves on July 29.
This follows the Chinese government’s second sale after commodities have sky-rocketed.
As China is massively reliant on imported copper as well as refined copper to meet demand from infrastructure and manufacturing sectors such as consumer electronics and electric vehicles, China will continue to hold influence as the world’s largest copper importer.
Factors that will influence copper prices and scrap copper in the future include manufacturing activities post-pandemic, reductions in Chinese scrap collection and processing, and relaxed regulations on scrap imports as certain metal grades such as copper scrap are given set standards to follow.
China arguably has had the best economic recovery following Covid-19 as the demand for copper remains high. Reducing future disruptions to the supply chain has led to the government strategically stockpiling copper.
This strategic stockpiling will likely increase as supply & demand for major metals such as Copper, Iron & Steel will inflate future metal prices.
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