Metal traders in the United States are sending copper scrap to countries such as Canada, Mexico, and Vietnam instead of China to avoid a 10% import fee, which is considered a risky move.
The shift in direction underscores the increasing strain in the international metal supply chain caused by the trade conflict between the United States and China. China heavily relies on US scrap as a crucial raw material for its foundries and copper refineries, which are responsible for approximately half of the world’s total metal output. Any prolonged disruption in this supply could have significant impacts on global markets.
The exact scale of the re-exports remains uncertain, but the shift illustrates the innovative strategies metal traders are using to circumvent increased expenses due to trade barriers and locate a market for the surplus of US scrap metal.
The nation is the biggest provider of secondary copper globally, sourced from various items like automotive parts and electronic wires. However, only 40% of this output is used within the country, as stated by BMO Capital Markets.
“These companies develop clever methods for transporting materials,” stated Xiaoyu Zhu, who works at StoneX Financial. “The 10% rate has put scrap companies at a pricing disadvantage, in addition to facing financial strain due to high interest rates.”
Exporting copper
China used to be the top export market for the US, but trade tensions between Washington and Beijing have disrupted this relationship. Beijing has levied a ten percent tariff on all American imports, including copper scrap, since May.
Chinese imports of U.S. copper scrap dropped significantly this year, decreasing from 39,373 metric tons in January to under 600 tons in July, the lowest amount recorded since 2004 according to Chinese customs data.
Other nations’ shipments largely made up for the difference, as China’s overall imports of 190,000 tonnes last month remained largely unchanged from the beginning of the year.
Shipments from Japan and Thailand have more than doubled since January, while Chinese imports from Canada saw a 29% increase. Additionally, U.S. export figures indicate that Thailand, India, and Canada were the primary destinations for American copper scrap in the second quarter.
