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Since the Spring Festival, the price of copper has skyrocketed, and the price of scrap copper has skyrocketed. Several tons of scrap copper that could not be sold before the Spring Festival were sold out in an instant two days ago. "I made 20 times more profit, and I made more money in one day than I could make in one quarter in previous years."
Huge profits are rare but hard to come by. Although the market outlook for scrap copper prices is still bullish, after these low-price inventories are cleared, intermediate links like Lao Li have returned to the days of following the market to earn a small price difference. Downstream copper processing plants are also worried about high-level stocking. With the peak season coming soon, will the price of scrap copper continue to soar?
"The price of scrap copper changes every day. I plan to take advantage of the current high price and sell the goods on hand." Lao Li told China Securities reporter , "Copper prices have been very stable in the past few months, but they began to rise rapidly during the Spring Festival. Take copper used to make cables, it was still about 50,000 yuan per ton before the Spring Festival, and now it has risen to almost 70,000 yuan per ton. "
Data provided by Baichuan Yingfu to reporters from China Securities Journal shows that since February 3, the price of scrap copper has risen rapidly. Taking copper as an example, the price rose from 50,700 yuan per ton on February 3 to 58,600 yuan per ton on February 24, an increase of 15.58%. Especially since February 17, copper prices have entered a period of accelerated rise, rising 10.76% in just 7 days.
Lao Li, who has been engaged in scrap copper purchasing for more than ten years, collects scrap wires, cables, motors, etc. from construction sites, factories and small scrap collection stations , and sells them to agents after preliminary sorting and processing, and the agents then It is shipped to Baoding City, Hebei Province and other places for processing into standard copper ingots , and then sold to downstream copper processing plants.
However, before the Spring Festival, the market for scrap copper was sluggish and it was difficult to sell it. Intermediaries such as purchasing stations and agents had accumulated a lot of goods. "It's dozens of tons more, one or two tons less, and it's about to fall into my hands. But I didn't expect that the price of scrap copper has continued to soar since the Spring Festival, and many people have made a lot of money." Lao Li told a reporter from China Securities News According to an account, "We usually only earn 50 cents per kilogram of scrap copper, but the scrap copper passively hoarded before the Spring Festival can now earn 20 times more profit."
Lao Li said, using his own purchasing station as an example: "I usually earn 20 times more profit here." We can collect more than 200,000 yuan of goods a day, and after sorting and processing, we can have 4 to 5 tons of scrap copper. After deducting the wages of four or five workers, we can make a profit of more than 200,000 yuan a year. only stocked up before the Spring Festival in the first two days. The few tons of scrap copper I sold were sold, and I made a profit of a quarter in previous years! ”
A sudden windfall
Some people are not as lucky as Lao Li.
Agent Xiao Wang, who was waiting to get the goods from Lao Li, told a reporter from China Securities Journal: "Because I am anxious to return to my hometown for the New Year, I have a truck with more than ten tons of goods. I am worried that it will not be sold before the Spring Festival. I just dumped it in my hands, so it is cheaper. I gave it to an agent friend. At that time, I thought I was very lucky. As a result, when I came back after the Spring Festival, I was dumbfounded and regretted the sale for hundreds of thousands of dollars less. "
Even so, Xiao Wang also regretted it. No plans to stock up. "The scrap copper purchase business mainly relies on volume, and the profit is very thin. The risk of stocking up is very high, because if the downstream price drops a little more, we may lose money. I usually sell it immediately after receiving the goods. The price of scrap copper is very Downstream price changes are very sensitive, we have no pricing power, and there is no point in stocking up."
Xiao Wang said frankly that the price of scrap copper continued to rise in the first half of last year. He tried to stock up on more than 20 tons of goods, but from mid-July to November. In the middle of this month, the price of scrap copper has been sideways for almost four months, but the stockpiled goods have been occupying funds and warehouses. In the end, I really couldn't hold it anymore and took action in October. "Taking into account the time, capital occupation and inventory cost , we didn't make much money."
What made Xiao Wang depressed was that not long after this batch of goods was sold, the price of scrap copper experienced another rapid rise in November last year. Although he regrets "selling too early", Xiao Wang still has no plans to stock up on goods, "the market is too difficult to grasp." Subsequently, the price of scrap copper fluctuated all the way down, and it was not until early February this year that this round of surge occurred. Xiao Wang could only sigh: "It's too early to sell again. But the price is so high, I don't dare to stock up."
The price of scrap copper is still soaring, but for middlemen like Lao Li and Xiao Wang, huge profits It can be encountered but cannot be sought.
Lao Li told a reporter from China Securities News: "The money earned after the Spring Festival is really a 'windfall'. After the batch of scrap copper stockpiled before the Spring Festival was cleared, it had to go on the market again. Although the shipping price continued to rise, But the purchase price of scrap copper is also rising, so it is back to the days when the price difference was 5 cents per kilogram. "
Looking for copper all over the world
Outside Lao Li's purchasing station, there were trucks of all sizes parked, like small ones. There is an endless stream of agents like Wang who come to buy scrap copper.
"Copper scrap is in short supply now, and there are many agents who come here to collect scrap copper. I also want to take advantage of this time to sell more goods, but the key is that I don't have much goods on hand." Lao Li told a reporter from China Securities News, "On the tenth day of the first lunar month The construction site has not started five years ago, so we can only collect some bulk goods. Now that the supply is tight, even if there is only a few hundred kilograms of scrap copper, I will send people out to pick up the goods. "
On the one hand, everyone is looking for copper all over the world. "; On the other hand, I feel that such a high price is like a "hot potato." During the investigation, we found that not only middlemen like Lao Li and Xiao Wang did not dare to stock up, but also copper processing companies did not dare to stock up at a high level in a short period of time. In addition, orders placed before the Spring Festival suffered huge profits due to the surge in copper prices. At a discount, companies are less motivated to produce. Downstream terminal manufacturers also have a strong wait-and-see attitude, with orders significantly reduced.
Even so, Lao Li and Xiao Wang still feel: "The price of scrap copper may still rise. "
Domestic scrap copper consumption accounts for about a quarter of copper consumption. Therefore, scrap copper prices are highly linked to downstream copper prices. . After the prices of all 12 domestically listed Shanghai copper futures contracts rose to their limit on February 22, the enthusiasm for long-selling in the copper market remained high, with copper prices hitting a new high in the past ten years.
"This round of soaring copper prices is affected by many factors, including inflation expectations under the Fed quantitative easing policy, strong expectations of overseas copper downstream demand, and also affected by factors such as the sharp rise in copper futures prices. "Yan Yu, a scrap copper industry analyst at Baichuan Yingfu, told a reporter from China Securities Journal.
A research report released by CICC on February 24 stated that against the backdrop of tight supply and demand and rising inflation expectations, copper prices are expected to continue to rise in the first half of the year. The upcoming peak season of
is also expected to support the continued strength of copper prices. Yan Yu pointed out: "The peak season for copper processing is coming, including the peak processing and use of wires and cables in March and April, and the processing boom of copper pipes, copper plates and strips in May and June. It is expected that copper prices will rise further, and scrap Copper prices will continue to rise. Copper prices are likely to peak only after entering the traditional off-season in the second half of the year. "
Domestic scrap copper consumption accounts for about a quarter of copper consumption. Therefore, scrap copper prices are highly linked to downstream copper prices. After the prices of all 12 Shanghai copper futures contracts listed domestically on February 22 rose to the limit, trading enthusiasm in the copper market remained high. The domestic spot copper trading range released by Tongxinbao last Friday was 68,960-69,180 yuan per ton.
Data source: Baichuan Yingfu
It is worth mentioning that drastic changes in copper prices may lead to a series of chaos in the cable industry. Some analysts pointed out that the short-term surge in copper prices will make customers who have not signed contracts start to wait and see, and those who have signed contracts may see manufacturers default. At the same time, benefiting from the recovery of the domestic economy and the improvement of the export market, the current prosperity of the cable industry is in a historically good period. The shortage of raw materials continues, may mean that the increase in copper prices will not stop in a short time. Next Price increases are likely to be steeper.
While many investors and analysts are optimistic, some analysts also reminded: Investors need to be wary of the risk of rising and falling when copper prices rise so much in the short term when the fundamentals of supply and demand have not changed significantly.
In addition, some people in the industry admitted that there is definitely a risk of rising and falling. Prices will not always be high, nor will they always be low. Historically, they have reached a high price of 80,000 yuan per ton, and they also fell to the level of 30,000 yuan per ton at the beginning of last year. , there are fluctuations in itself.
Extended reading: Scrap copper supply will determine the global refined copper pattern
In the past three months, China’s scrap copper imports averaged 103,000 tons per month, up from 76,000 tons in the three months before the customs code was revised in November last year.Delays in the new
regulations, which were supposed to be rolled out last July, and ongoing teething import issues are likely to curb imports in the short term. Disruptions to the shipping industry over the past year and specific issues related to Chinese container shipping will also have an impact.
New import regulations exceed most expectations, with China’s metal recycling agency just authorizing an additional 26 foreign suppliers to supply scrap copper to China.
This suggests that imports will continue to expand this year, but that international scrap trade is unlikely to simply return to pre-China lockdown levels in 2018.
In the early part of the past decade, China imported more than 4 million tons of copper scrap annually, and its total volume will not return to its previous peak.
A large part of this volume is expanded by low-grade copper scrap, but under new import regulations, low-grade copper scrap is difficult to enter China.
Additionally, trade flows have changed over the past few years, with low-grade scrap being transshipped through Malaysia where it is sorted and upgraded into higher quality material or copper ingots before being shipped to China. Malaysia is currently China's largest copper scrap supplier, accounting for 18% of total imports last year. The United States, once China's main supplier, only accounts for 11%. The country shipped more scrap copper to Malaysia last year than China.
In fact, China has offshored its low-grade copper scrap business, and Malaysia seems to have become a new transit point.
Changing the Balance
html Copper scrap has been an important part of China’s supply chain for more than 20 years, which is why the Chinese copper industry vigorously resisted and ultimately successfully resisted a comprehensive import ban.When imports fall, it will force production to reduce the amount of "direct melt" material, forcing buyers to turn to refined metals.
A variety of factors have jointly promoted China's boom in refined copper imports. Last year, China's refined metal imports increased by 1.1 million tons, reaching a record high of 4.7 million tons.
Strong industrial comfort after the coronavirus suppression, related supply chain restocking, and strategic procurement by state agencies all played a role.
So is the copper scrap shortage, with China's total imports falling 37% last year to 943,000 tonnes. Because except for the highest content of scrap copper, all other scrap copper is prohibited from import.
As a result, bulk copper scrap imports fell by 550,000 tons year-on-year, causing a huge supply impact on China's copper industry. On the contrary, as scrap copper import momentum picks up, the substitution effect on the refining market should weaken.
Scrap copper controversy
This relationship between scrap copper supply and refined copper demand is not only a Chinese problem, but also a global phenomenon. Recycled copper, whether fed directly into products or processed in refineries, accounts for around 30% of global copper use each year. The lower the copper scrap price, the lower the amount of refined copper needed to balance the market. According to Morgan Stanley, the global scrap metal recycling rate increased by 1%, equivalent to approximately 300,000 tons of refined metal ("Copper and Renewable Energy", March 23, 2021). The biggest driver of copper scrap supply is price. Higher prices stimulate copper scrap collection and processing.
According to data from the International Copper Study Group, global copper scrap used for refining into new metals surged by 20% in 2006, a year in which copper prices almost doubled. In the copper bull market, scrap volumes continued to grow and surged another 25% between 2010 and 2012, when copper prices peaked. The group said the decline in copper prices in the middle of the century caused copper trading volumes to fall by 10% by 2016. History suggests that a new round of spikes in scrap copper prices is imminent, given that London Metal Exchange (LME) copper prices have more than doubled since the COVID-19 lows of $4,371 per ton in March last year.
For analysts such as Morgan Stanley, this is a reason to be cautious about the outlook for copper in 2021. The bank's fourth-quarter forecast is US$8,488 per ton, lower than the LME's current US$8,780.
Citi ( Citi) has called for the establishment of a "copper super cycle" because Citi does not believe that the supply of scrap copper can expand enough to fill the 500,000 tons supply gap it expects this year.
The bank looked at seven possible copper scrap supply scenarios based on previous patterns and concluded that only one possibility (repeated from 2012) could produce enough material to fill the gap.
Citi believes: "We believe this is a continuation of the cycle and is unlikely to happen quickly due to logistical constraints, and we see that there tends to be an eight-month lag between price increases and scrap copper export growth.
scrap copper The paucity of industry data means the data is inevitably ambiguous, as is the subsequent impact on the refined copper market.
But there is no doubt how strong the scrap market, one of the most powerful balancing mechanisms in the copper market, is about to recover. It will determine the pattern of the copper market in the next few months.
Copper Xinbao’s perspective: The global economy will rebound from the epidemic in 2021, China’s economic growth will lead the world, and the demand for copper entities will increase sharply, while the supply of copper entities will be limited, and various social inventories and waste will be limited. The supply of copper is limited. In the super cycle where the flood of US dollars has led to global investment and speculative funds placing heavy positions in commodities and the financial war between China and the United States, Dr. Copper will surely become the most shining star of price growth and finance in commodities. As a key commodity in the war, copper is expected to exceed RMB 100,000/ton in 2021 (the amount is mainly based on the intensity of the financial war). After the breakthrough, there may be a sharp correction, with the main shock in the range of 60,000-80,000 yuan or a high probability (financial war) The tug of war)! ( Tencent Finance, Fubao Nonferrous, additions and deletions)
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