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China and Nonferrous Metal Trade Flows

The size and scope of targeted Chinese scrap import restrictions remain the overriding concern for scrap exporters in the United States and around the globe. Non-metallic scrap commodities such as plastic scrap and recovered paper have borne the brunt of the downturn so far but nonferrous scrap commodities may not be far behind.

As per usual, official trade data lag what’s happening in the physical market place. On the copper trade front, Macquarie Research reports that Chinese copper scrap imports rose to 310,000 mt in August and were up 13.7 percent year-to-date at 2.45 million metric tons. But in looking at the recent trends in Chinese scrap inflows, they report that “on a 3 {month moving average} basis the scrap volume growth seems to be falling back. Given the disruptions from 1 July to the yards in south China, and the associated time lag in this translating into shipments, we expect September data to show a marked decline. Cathode imports meanwhile have gained over summer, and although August total tonnage is down to 255kt from 283kt the prior month, the rolling trend sees volumes rising back to YoY growth. The two trends together seem to point to a natural end to the scrap penetration of cathode market share earlier in the year.”

According to trade date from the Census Bureau, U.S. exports of copper and copper alloy scrap during the first 8 months of 2017 increased 9.5 percent year-on-year through August to more than 673,000 metric tons. By volume, YTD copper scrap exports to China increased 10.2 percent during Jan-Aug 2017 to more than 463,000 tons, while exports to Canada rose 32 percent, shipments to Hong Kong were up 67 percent, exports to Mexico were up nearly 21 percent, and loadings for Japan increased 55 percent. In contrast, U.S. copper scrap exports to leading consumers in Europe (including Germany and Belgium) and India declined so far this year, likely due in part to regional supply dynamics and volatile foreign exchange movements:

Oct25NFMktUpdChart3

In light of the elevated market concerns about Chinese scrap demand, China’s push for higher quality scrap imports, and looming import restrictions, here’s a closer look at how U.S. copper and copper alloy scrap shipments to mainland China have shaped up so far this year by grade:

Oct25NFMktUpdChart4

As for U.S. aluminum scrap exports (including UBCs and RSI), the official U.S. trade data show Chinese demand was up 13.5 percent year-on-year through August to more than 521,000 metric tons. Other growth markets for U.S. aluminum scrap this year have included South Korea (+23 percent), Mexico (+20 percent), India (+16 percent), and Indonesia (+20 percent):

Oct25NFMktUpdChart5

Looking at nickel, Macquarie Research reports that the “latest Chinese nickel data to end-August show the extent of destocking in China so far this year. Total net imports of finished nickel (metal, oxide, ferronickel and NPI) were down 16 percent YoY in the first eight months of the year to 368kt Ni. Apparent consumption (production plus net imports) fell 8 percent YoY to 740kt. Strong 300-series stainless production and higher demand for nickel in lithium ion batteries lead us to estimate that real nickel consumption rose just under 13 percent YoY to 780kt, implying destocking in China of at least 40kt year-to-date.”

Nonferrous Beat

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