KUALA LUMPUR Chinese copper smelters are bracing for a potential shortage of scrap metal as Beijing’s efforts to create a level playing field have the unintended effect of reducing supply.

The Fair Competition Review regulation, due to take effect in August, forbids tax benefits without either approval from the State Council or permission by existing law. Many of China’s copper scrap processors rely on tax rebates from local governments, so they may have to cut production, which will hit smelters that need the feedstock to make refined metal. 

Around 30% of China’s refined copper production used scrap metal as a feedstock in 2023, Chen Xuesen, a spokesman at the China Nonferrous Metals Industry Association, said in a press briefing earlier this year.

Copper blister and anode processed from scrap are alternative feedstocks to ore concentrate, which has also been in short supply this year. The processing fees to convert concentrate into metal collapsed to near zero on the spot market due to supply setbacks at global mines and a relentless expansion in Chinese smelting capacity.

Some manufacturers processing copper scrap into anode and blister have already cut production in anticipation of rising costs, state-owned researcher Beijing Antaike Information Development Co. said in a note last week.

The competition policy could also disrupt production of other metals that use scrap as a feedstock including aluminium and lead, Shanghai Metals Market said in a report last week. 

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  - Bloomberg