Market
June 25, 2024
US copper scrap boosts China's edge amid surging prices and shortages
Written by Lewis Leibowitz
China’s manufacturing growth continues. Among other things, China is the largest producer and consumer of refined copper products in the world. Strangely enough, among all the efforts to reduce China’s competitiveness globally (and thereby to enhance U.S. manufacturing competitiveness), the U.S. sends a huge amount of copper scrap to China, where it is transformed into refined copper products for domestic consumption and exports.
Copper is in demand now. That has caused an acute shortage of copper and its inputs. And prices are surging.
China has been able to attract large volumes of copper scrap. The U.S. is a leading exporter of copper scrap, and China is the largest buyer of U.S. copper scrap exports, purchasing in 2023 and expanding its purchases in 2024.
While there are substitutes for copper, it continues to grow because of its utility. From autos to the electric grid, copper plays an enormous role in industry and chemistry. Yet, in the U.S., lawmakers have paid minimal attention to the export of copper scrap to China, which is helping the country to export more in the form of advanced copper products, such as wiring.
When it comes to all types of scrap metal, the U.S. is one of the largest exporters. In three basic metal scrap items (copper, steel and aluminum), the U.S. has massive trade surpluses, exporting far more than it imports. Most domestically produced metal scrap is consumed domestically, making imports less necessary (imports tend to be imported because of geographic location of plants—transport costs can be much lower if foreign vessels are used). With all the domestic production of products made from copper, steel and aluminum scrap, the availability of scrap from domestic sources should be an incentive to increase domestic production of these items and keep the exports at home. But that does not appear to be happening.
As many in the business community are aware, there are many obstacles to expanding domestic manufacturing: labor shortages, transport costs, government regulation of new plant construction or expansion, to name a few.
China is not the largest producer of copper; Chile is. According to 2023 data, the U.S. is in fourth position. But copper scrap, especially scrap that is made to conform to high standards of quality and purity, has supplemented China’s domestic production. And, according to recent reports, China is accelerating its production of items made from copper. With the decline of building and construction for Chinese consumption at home, many of these items are appearing in global markets, causing unease in capitals around the world.
Might we see efforts to constrain U.S. exports of steel, copper and aluminum scrap, especially to China? Stay tuned.
