Chinese metal consumers are struggling to keep a consistent pipeline of nonferrous scrap imports coming from the US as they try to stay in compliance with an ambitious environmental agenda.
China has been an inconsistent home for US nonferrous scrap in 2021 as a phasing in of strict contained waste standards has kept the country from accepting all but the cleanest packages.
Demand for #1 copper wire and tube scrap has ramped up recently in China as importers find it increasingly hard to rely on lower-grade #2 copper scrap, which is often rejected as too dirty now after being a staple item in years prior.
Impaired Chinese access #2 copper scrap has steered buyers toward cleaner #1 copper in its place, tightening spreads internationally.
"If China would stop rejecting good loads of #2, they might be able to buy more material," a dealer told Argus.
Buying spreads for #1 copper scrap went to 15-17¢/lb under cif Asia in the most recent assessment — the tightest since July 2020—from 17.5-21¢/lb under a week earlier.
Rejection risks, trucking costs, container availability and port congestion along with delayed seller payments have caused some US dealers to avoid exporting nonferrous scrap to Asia, forcing importers to compete.
As China buys #1 copper scrap at tighter discounts to the CME, US consumers have been pressured to hike their spreads, but on a week delay. Domestic buying spreads were 20-21¢/lb under on 29 September — the slimmest discount since August 2020 — from 20-25¢/lb in the prior week. Buying discounts have tightened in the US but are not as slim as in those available Asia. US consumers have plenty of dealers to choose from, willing to offer scrap to domestic homes, keeping spreads from tightening further for now.
Aluminum scrap
China's scrutiny toward imported aluminum scrap has become so intense that market participants reported no high-grade US 99/3 zorba going directly into the country in September.
Even US sales of higher-grade aluminum raw materials to China, such as polished twitch, have been scarce to nonexistent, market participants told Argus.
The country's domestic aluminum die casting industry has even turned to India and Southeast Asia for ADC12 alloy ingot because it has been unable to make its own. Up until recently, China was a major regional power for cast aluminum alloy exports, but its capabilities have been hampered by a lack of access to scrap.
Chinese import prices for ADC12 alloy are traditionally at least $100/t lower than import prices from Japan, which is the dominant die caster in the region, but recently Chinese import prices have been trading at $200-300/t more than Japan, showing desperation for aluminum units.
