Copper and Brass Industry Seeks Export Controls

BY ROBERT P. MADER of CONTRACTOR’s staff

WASHINGTON — U.S. copper and brass foundries have filed a petition with the U.S. Department of Commerce asking it to put limits on the amount of copper scrap being exported to China. The Copper & Brass Fabricators Council and the Non-Ferrous Founders’ Society, through their law firm, Collier Shannon Scott’s international trade section, told Commerce that rising demand for copper scrap and copper-alloy scrap in China as responsible for the excessive drain of the metals and the resultant price increases and shortages in the U.S. market.

The petition contends that the rapid increase in exports of all grades of copper scrap is the primary cause of dwindling domestic supply and sharp price increases in recent years.

“Our clients are particularly hard hit by the lack of supply of copper and copper-alloy scrap metals,” said attorney David Hartquist. “China’s escalating consumption of these products violates U.S. trade laws, causing the U.S. brass mill industry and brass and bronze foundries to face unmerited hardships.”

China — with its rapid economic growth, insatiable demand for scrap and the high prices that Chinese purchasers are willing to pay to buy U.S. scrap — is targeted as the major global culprit in the shortage. According to the petition, essentially all the growth in U.S. exports of copper-based scrap in recent years has been attributable to rising consumption in China.

The petition notes that copper scrap can be categorized as coppers, dilute copper-alloys, brasses, bronzes, copper nickels and silver nickels. New copper, called Bare Bright by the industry, is produced in sheets called copper cathode.

Construction is the biggest consumer of copper followed by the electronics industry

The U.S. copper industry relies heavily on scrap copper as a raw material. Copper-based scrap has constituted about half the copper consumed in the United States for the past 20 years.

Brass mills, such as the ones that make plumbing fixtures and fittings, have traditionally used copper-based scrap for the majority of their metal input. According to the U.S. Geological Survey statistics, copper scrap accounted for 61.1% and refined copper (primarily copper cathode) accounted for 39.9% of U.S. brass mills’ consumption of copper in 2002.

Exports of copper and copper-alloy scrap from the United States have increased quickly and significantly in recent years, the petition states. From a level of 316,342 metric tons in 1999, exports of copper-based scrap increased to 494,284 metric tons in 2000; 559,699 metric tons in 2001; 566,838 metric tons in 2002; and 753,541 metric tons in 2003.

Exports of copper-based scrap have increased to a highly significant part of U.S. scrap supply. While exports represented 16.2% of U.S. copper-based scrap supply in 1999, that figure increased to 23.7% in 2000, 28.9% in 2001 and 31.1% in 2002, before surging to 39.4% in 2003.

In 1999, exports to China of copper-based scrap stood at 86,601 metric tons and accounted for just 27.4% of total U.S. exports. That volume more than doubled in 2000 and tripled in 2001, as exports to China accounted for 43.3% of all exports in 2000 and 56.6% in 2001. Copper-based scrap exports to China increased moderately in 2002 to 332,110 metric tons (58.6% of exports) before jumping to 532,901 metric tons in 2003, representing 70.7% of total U.S. exports.

The petition points out that the price of new copper cathode is set by international commodities exchanges, the Comex in the United States and the London Metals Exchange. Typically scrap has been sold at a considerable discount to the price of new metal. Scrap has become so scarce, however, that its price at some points has been within a penny a pound of new copper.

Average monthly prices for the most commonly used, 99.9% pure, No.1 copper scrap stood at 74.16 cents per lb. through the first six months of 2003. To date in 2004, No. 1 copper scrap prices reached a peak daily price of $1.37 per lb. on March 1, a price more than 100% higher than as recently as October 2002.

The copper and brass foundries point to metals industry trade magazine reports that Chinese buyers have paid scrap yards as much as 7 cents per lb. over the Comex price for new copper. They maintain the Chinese government is subsidizing the payments.

The trade groups are asking Commerce Department to monitor exports on a weekly basis. The petition states that copper scrap exports in late 1990s averaged 383,742 metric tons. The groups are asking Commerce to limit exports to 380,139 metric tons per year.

Commerce accepted the petition in late April, making June 7 the deadline for written comments. A public hearing may be held and the secretary of Commerce would decide what action should be taken in July. The secretary would publish proposed regulations in the first part of August and the final regulations would be published and implemented in September.