Tight Japan Copper Scrap Supply

Japanese copper scrap supply is tight for lower grade scrap, which is used for smelting. Major makers experience the scrap arrival volume is around 40% lower than planned level in the year due to lower scrap generation under slow building scrap activity. The tight supply could impact on profitability of smelters.

The scrap from building wrecking contains more than 95% of copper. The supply decreases due to slower building activity. A smelter source said the scrap purchase volume was around 60% of the planned level in January-June.

The lower domestic supply is partly due to higher export to China. Chinese buyers increased the copper scrap import due to higher demand and national stockpile while speculators purchased in arbitrage transaction to take chance under lower priced international market than Chinese price. Chinese buyers purchased Japanese scrap at 50,000 yen per tonne higher than Japanese smelters.

Rolled copper makers cannot use the construction copper scrap due to steel and aluminium contents while copper smelters use as cooling material at the process to remove steel, sulfur and other impurities. The scrap usage can reduce high priced ore consumption reducing the production cost.

The construction copper scrap market price is around 380 yen per kilogram. However, some dealers pay more than 400 yen to secure materials. Domestic smelters try to secure more scrap but the dealers cannot meet the demand level.