China's Copper Scrap Imports Surge in July Amid Narrowed Arbitrage Losses

China's copper scrap imports rose sharply in July, increasing by 14.8% from the previous month, driven by a reduction in import arbitrage losses that had previously discouraged purchases. The narrowing of the arbitrage loss, which fell to between -Yn1,000 and -Yn1,500 per tonne in June from nearly -Yn6,000 per tonne in May, played a key role in this surge.

In May, the London Metal Exchange (LME) saw three-month copper prices reach a record high of $11,104.50 per tonne, making copper concentrate an increasingly expensive feedstock for Chinese producers. In response to the rising costs, many refined copper producers in China turned to copper scrap as an alternative, leading to a 20% increase in copper scrap imports during the first half of the year.

The supply crunch for copper concentrate significantly impacted the market, pushing treatment and refining charges (TC/RCs) down by 88% from January to June. The shift towards copper scrap was further accelerated by the cancellation of a tax rebate on 1 August, prompting most secondary copper processors to purchase scrap at the full tax rate. This trend is expected to continue into August, supported by the narrower import arbitrage losses in July.