01 THE SETUP

SMM spent this week walking copper scrap yards in Ningbo’s Zhenhai district. Inventory was thin almost everywhere, with lower-grade No. 2 semis dominating what little remained. One yard’s brass and shredded copper sat at under a quarter of normal levels; another was extremely low across every category. Several processors said they’d been forced to lean harder on imported scrap because they can’t execute China’s “reverse invoicing” compliance regime at scale.

Import data confirms the shift outward. China’s July copper scrap imports rose to 219,100 tonnes, up 15.3% YoY; the Jan-Jul total reached 1.46Mt, up 9.4% YoY. In short, domestic scrap is tight, so China is buying more from abroad to fill the gap.

02 WHY IT MATTERS

Scrap is not a marginal input in Chinese refining. Antaike data cited by S&P Global put scrap-derived feedstock at 25.2% of the feed used in China’s refined copper production in H1 2026.

Meanwhile, primary refined feedstock — concentrate — is in severe deficit: Platts assessed CIF China clean concentrate treatment charges at -$173/t on 5 August, the lowest since the assessment began in 2021, and H1 concentrate imports fell slightly.

Yet refined output kept climbing to a record 1.33Mt in June and 7.61Mt across H1, up 5.2% YoY. S&P and Antaike attribute that resilience directly to heavier use of scrap, blister/anode and other secondary “cold materials.”

In other words, while output is high, it’s partly due to the scrap buffer absorbing a concentrate shortage. Further tightening at the scrap end further reduces the available buffer and may threaten refined production.

03 THE DECODE

The domestic tightness is measurable, not just anecdotal. July’s secondary copper rod operating rate fell to 12.43%, down 18.47 percentage points YoY, on structural shortages of compliant, tax-deductible scrap.

Prices also say the same thing. High-grade scrap is being bid close to refined copper value — bare bright at roughly 98.5-99% of LME in mid-August, and No.1 was around 96-97%.

That tightness has followed China offshore, and the overseas market it’s increasingly leaning on is not uniformly loose: SMM’s ex-China review reports bare bright copper in persistently tight supply with low inventories, while more of what is available sits in lower No.1/No.2 grades.

Of course, scrap is highly price-elastic, and, at these copper prices, higher bids should pull dormant material out of demolition sites and industrial stocks. So China can simply pay up. Further, S&P estimates about 8.4Mt of copper in end-of-life scrap became available globally in 2025 while only around 4Mt was actually recycled.

So a global scrap surplus theoretically exists if higher prices eventually incentivize higher collection, sorting and processing capacity. However — and S&P is explicit about this — while scrap is more price-elastic than mine supply, its elasticity is over the medium term, meaning this surplus doesn’t instantly appear on the market tomorrow.

And this is where the near-term constraint begins to look particularly nasty. China imported 2.247Mt of copper scrap in 2024, dwarfing every other buyer — Germany took 463kt, India 329kt, South Korea 299kt, Japan 241kt. And a buyer that large cannot just passively tap global supply. It competes tonnes away from other consumers, bids up the premium as it goes, and, if the EU is any indication, is increasingly drawing increased scrutiny.

In July last year, the EU Commission introduced surveillance of metal scrap imports and exports, citing “scrap leakage to third countries” as a cause for concern. This follows the 2024 introduction of its new regulation on waste shipments which, from 21 May 2027, introduce export restrictions on green-listed waste to non-OECD countries. Non-OECD countries wishing to import green-listed waste from the EU will be required to apply with the European Commission “and demonstrate their their ability to treat this waste environmentally soundly.” China did not appear in the Commission’s February 2025 list of 24 non-OECD countries that had requested continued eligibility.

The result of all of this is that China’s headroom in scrap tonnage — the principal shock absorbers protecting Chinese refined output from concentrate scarcity — may be lowering. And while it can still tap global supplies, each turn costs more, narrowing scrap’s discount to cathode.

For a refining system that now leans on scrap for a quarter of its feed, any tightness in that buffer, if already-dwindling margins are squeezed further, may very well show up in the refined output number itself.

04 WHAT TO WATCH
 
Paying up to pull metal in: Watch scrap payables — bare bright versus LME above all. The high-grade discount is already near zero; if it holds there or inverts through the September-October peak season, the marginal tonne is getting harder to source. Pair it with the monthly import prints — continued YoY growth on rising payables is the “paying up to pull metal in” signal.

Refined output against feed mix: Whether record output holds as the scrap share climbs. If concentrate TCs stay negative and scrap tightens at the same time, the substitution that has protected output runs out of room. Track monthly output against Antaike’s feedstock-share updates.

/ Zambia’s Copper Boom Is Still Mostly a Forecast

Zambian copper output rose just 0.45% YoY in H1 to 447kt despite stronger production at Kansanshi, KCM and several other mines — an underwhelming starting point for a country still targeting 3Mt of annual output by 2031.

/ Jiangxi Copper’s H1 Profit More Than Doubled

Jiangxi Copper reported H1 revenue up 19.5% and net profit up 106.8%. Against the backdrop of collapsing concentrate treatment charges, the result is a useful reminder that integrated copper producers can look very different from stand-alone smelters.

/ US EXIM Lines Up $1.1bn for Ivanhoe Electric’s Arizona Copper Project

Ivanhoe Electric has received preliminary backing for up to $1.1bn in US EXIM debt financing for Santa Cruz. It’s another sign Washington’s copper-security push is moving beyond rhetoric and into direct project finance.

That’s the wire for today. Until next time, don’t forget that the backup plan needs a backup plan

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