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China takes action to lower raw material costs

In China, three batches of copper, aluminium and zinc raw materials totalling 420,000 tons have been put into national reserves in accordance with the actions identified by the executive meeting of the country’s State Council to ensure the supply of bulk commodities and stabilize prices so as to alleviate pressure on enterprises’ raw material costs through reserve market regulation.

On July 5, China’s National Development and Reform Commission and the State Bureau of Grain and Material Reserves (SBGMR) secured the first batch of reserve raw materials totalling 100,000 tons through open online bidding; this comprised 20,000 tons of copper, 50,000 tons of aluminium and 30,000 tons of zinc. On July 21, a second batch of 170,000 tons entered the national reserves, made up of 30,000 tons of copper, 90,000 tons of aluminium and 50,000 tons of zinc. And on September 1, the state released the third batch of national reserves totalling 150,000 tons of copper, aluminium and zinc raw materials. In the near future, the SBGMR will conduct follow-up releases based on market supply/demand and price trends.

In the first half of 2021, China’s recycled copper imports increased by around 91% year on year to 821,400 tons owing to the adjustment of national policy such that high-quality recycled copper can be freely imported, with approvals no longer required. Demand for recycled copper has increased significantly among the various copper product companies, partly because it is cheaper than electrolytic copper and also because its use reduces carbon emissions and so protects the environment.

The price of copper has remained elevated of late and downstream product prices have increased. Compared to the same period last year, the price of recycled copper is more than 25% higher and the differential to electrolytic copper has gradually narrowed from around RMB 3000 per ton to nearer RMB 1000.