According to recently released data from China’s General Administration for Customs, the country imported 183,200 metric tons of shredded and copper scrap in June this year. This marked a modest 1.06% month-on-month drop in total imports of this scrap metal, but year-on-year, the figure depicted an 8.06% increase in total volumes.
These import volumes were within expected ranges, and the Shanghai Metals Market explains that three key factors account for these import patterns. First, the demand for copper scrap within the domestic smelting market increased due to supply shortages of raw copper ore. Smelters turned to the scrap metal market to shore up their production volumes.
Secondly, import sources of scrap copper have undergone structural adjustments. In the past, the United States was a major supplier of scrap copper to China. However, the ongoing trade war has impacted commodities trading between China and the U.S., and imports from America have sharply dropped. Most scrap copper from the U.S. is being shipped to Thailand and other countries. Those countries have, in turn, increased their exports to China. This structural change has enabled total import volumes to largely remain unchanged though the particular sources have seen changes to the volumes shipped.
Thirdly, the month of June happened to come around during the import window for the commodity. As a result, order arrivals increased to shore up import volumes for scrap copper. The import window usually opens up when price differences between those quoted on the LME and those on the SHFE create opportunities for traders to turn a profit by importing/exporting copper scrap into China. In June, a profit window opened, and imports were made.
Looking at the market share of different source countries, Thailand came in first with their scrap copper exports accounting for 14.3% of all scrap copper imported by China. The United States used to feature prominently among exporters of scrap copper to China. However, the country dropped to third major exporter in May and then slid further to 21st in June. American scrap copper exports to China claimed just 1.09% of imports after only 2,000 metric tons were shipped during the month of June.
Meanwhile, Japan’s exports increased by 27.9% in June while those from Spain saw a 74.6% year-on-year increase to put the country in third position among exporters of scrap copper to China.
Overall, the market for scrap copper is projected to remain tight as supplies from the U.S. largely stay out of the Chinese market due to the tariff situation. The raw ore supply squeeze posits a positive indicator for investors watching prospective copper producers like Torr Metals Inc. (TSX.V: TMET) that could, in the long term, bridge part of that supply gap.
NOTE TO INVESTORS: The latest news and updates relating to Torr Metals Inc. (TSX.V: TMET) are available in the company’s newsroom at https://ibn.fm/TMET
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