China Copper Scrap Cash Spreads Widen Amid Price Fluctuations

China Copper Scrap

Cash spreads for Chinese copper scrap imports have increased from last week due to lower copper prices on major exchanges.  Scrap sellers maintained firm offers as LME copper prices fell to a four-month low of $8,757/tonne on December 31st.

Import Arbitrage Loss and Tariff Exemptions

China's copper scrap import arbitrage loss widened to -1,000 yuan/tonne ($137/tonne) this week, compared to a small profit in late December. This widening loss is attributed to lower domestic spot copper metal prices relative to LME prices, resulting in limited trading activity.  Despite this, China will expand its import duty exemptions on more recycled copper feedstocks in 2025. The government has broadened the products included under HS code 74040000 to "recycled copper and alloy feedstock" for 2025, from "recycled brass copper feedstock and recycled copper feedstock" in 2024. The import duty for this HS code remains at zero for both years.  However, market participants remain cautious about importing copper scrap from the US, even with the expanded tariff exemptions in 2025.

Market Outlook and Price Rebound

LME three-month copper prices have since rebounded, rising from a close of $8,781.50/tonne on December 31st to a close of $8,980/tonne on January 7th.  Positive investor sentiment has been fueled by the People's Bank of China announcement of increased financial support for technology innovation and consumption, along with measures to enhance liquidity, safeguard capital markets, and potential reductions in interest rates and the reserve requirement ratio for banks.