Chinese companies will continue "madly buying" scrap copper in overseas markets for the next five years, with industrialization and urbanization spurring demand, a senior executive of a unit of the Yunnan Copper Group said.
The government is supporting development of domestic recycling operations, but it will take time to build up local production of the cost-reducing substitute for virgin copper, Guangdong Qingyuan Yunnan Copper Nonferrous Metal Co. General Manager Tao Yonghe said.
"China's economic growth guarantees strong demand for refined copper, and due to higher prices and limited supply of recycled copper in the domestic market, demand for scrap-copper imports will remain firm in the [next] five years," Mr. Tao said on the sidelines of an industry conference.
China imported 400,000 metric tons of scrap copper in May, a 5.3% increase over April, according to the General Administration of Customs.
Scrap copper is usually sold at a discount to refined copper sold on the LME, but the demand from China has nearly erased the price gap.
"One of our suppliers in the U.S. told me that the Chinese are madly buying scrap there, and that allowed him to offer scrap copper at the same [level] as London Metal Exchange cash prices," he said. Yunnan Copper Group, China's fourth-largest copper producer by output, is a unit of state-owned Aluminum Corp. of China, or Chinalco.
When refined-copper prices are high, fabricators often turn to scrap metal for processing into semi-finished products such as copper tubes and wires. Smelters in China are also using scrap copper to produce copper cathode, in a bid to reduce costs and improve profit margins.
Greater output and ample stocks have allowed China to import less refined copper. In May, China imported 149,325 metric tons, a 30-month low and a drop of 6.9% from April, the customs office said Tuesday. Refined copper usually accounts for 60% to 65% of China's total copper imports.
Beijing has set a goal to nearly double its production of recycled metals—including copper, aluminum and lead—to a total of 12 million tons by 2015, compared with 7.75 million tons last year, the Ministry of Industry and Information Technology said earlier this year.
Under the plan, recycled copper is to account for about 40% of total copper output, and recycled aluminum and recycled lead for 30% and 40% of output in their categories.
Guangdong Qingyuan has started commercial operations at a project expected to produce 100,000 tons of recycled copper a year, Mr. Tao said.
"Production of recycled copper has accounted for about 35% of China's total copper output in the past few years, and I think that percentage will go up gradually," especially with government support for the metal-recycling sector, he said.