Overview

In the first quarter of 2026, the recycled copper market faced weak supply and demand amid geopolitical tensions and shifting tax policies. Prices surged sharply to a record high before retreating rapidly, while the spread between refined copper and scrap narrowed from elevated levels back to a more rational range.

On the supply side, domestic availability declined significantly, and the growth in imports slowed. On the demand side, the processing activity index fell below the level seen in the same period of previous years.

Looking ahead to the second quarter, as policy directions become clearer, the supply-demand structure of the recycled copper market is expected to improve. Prices may bottom out and rebound, accompanied by a pickup in overall market activity.

Review of the Recycled Copper Market in Q1 2026

1. Prices: Sharp Rise Followed by Rapid Decline

In the first quarter of 2026, domestic recycled copper prices fluctuated sharply, showing an overall inverted “V”-shaped trend. In January, supported by expectations of Federal Reserve rate cuts, an optimistic consumption outlook, and tight copper concentrate supply, prices continued to rise and reached a historic peak on January 29, with mainstream market prices for tax-excluded bright copper scrap hitting RMB 93,300/ton, up RMB 9,300/ton from the end of 2025. In February, coinciding with the Chinese New Year holiday, market activity was subdued, while domestic inventories continued to build, keeping prices fluctuating at elevated levels. In March, renewed geopolitical tensions in the Middle East drove oil prices higher, triggering inflation concerns and weakening expectations of Fed rate cuts; as a result, recycled copper prices fell rapidly, largely giving back the gains made at the beginning of the year and stabilizing at around RMB 86,000–87,000/ton.

2. Refined–Scrap Spread Narrows

In the first quarter of 2026, the spread between refined copper and scrap remained elevated but continued to narrow, still staying above the average level of the same period last year. The average spread in Q1 stood at RMB 3,384.5/ton, up RMB 1,120.25/ton from the 2025 average of RMB 2,264.25/ton. During the quarter, copper prices surged and then retreated, while the invoice premium rose to around 10%, weakening the cost-performance advantage of recycled copper. After the Chinese New Year, as enterprises resumed operations, procurement demand from scrap-consuming processors rebounded; however, with copper prices softening and traders facing significant losses, spot recycled copper prices remained firm, further narrowing the spread. By the end of March, the refined-scrap spread was fluctuating below the reasonable range.

3. Supply: Domestic Contraction, Slower Imports

Domestic supply: In the first quarter, recycled copper supply totaled 686,200 tons, down 21.64% year-on-year, with overall circulation declining. In January and February, the rise in recycled copper prices failed to boost domestic circulation. Affected by changes in recycled copper processing policies, market participants showed weak pre-holiday restocking willingness, holidays started earlier, and trading activity remained subdued. After the Chinese New Year, policy uncertainties persisted, and coupled with the sharp price decline in March, the resumption of operations at recycled copper processing enterprises was slow, procurement demand did not see a meaningful recovery, and buyers intentionally pressed for lower prices, while suppliers were reluctant to sell, further reducing domestic circulation of recycled copper.

Imports: According to customs data, recycled copper imports totaled 400,300 tons in January–February, up 4.64% year-on-year, indicating sustained demand for imported recycled copper. Despite subdued trading sentiment during the Chinese New Year holiday period, domestic import traders showed strong pre-holiday stocking intentions, driven by expectations of post-holiday demand recovery and improved import arbitrage. Data tracked by Mysteel shows that import arbitrage losses narrowed during January–February, with profit windows briefly opening, mainly due to changes in domestic recycled metal processing policies, which altered the structure of procurement demand sources and significantly increased demand from scrap-consuming processors for tax-included recycled copper raw materials.

4. Demand: Processing Activity Below Historical Levels

In January–February, affected by the Chinese New Year holiday, both supply and demand sides of the domestic recycled copper market suspended operations earlier than usual, and post-holiday production resumption was sluggish due to policy uncertainties. According to Mysteel surveys, capacity utilization rates for recycled copper anode processing and recycled copper rod production in January–February were both lower than the same period last year. In March, operating rates failed to recover effectively; under profit pressure, capacity utilization for recycled copper anodes fell to around 30% in late March, while recycled copper rod utilization remained below 20%. Overall, demand for recycled copper in the first quarter was relatively weak.

5. Processing Margins: From Profit to Loss

Taking recycled copper anode processing as an example, processing margins narrowed from elevated levels in the first quarter. In January, profits for producing anodes from recycled copper (excluding by-product credits) showed a clear advantage, with most integrated producers favoring anode output, and the industry index remained at a relatively high level. From February to March, expectations of policy changes led to a sharp increase in invoice premiums for recycled copper, while the circulation of tax-included recycled copper was unable to meet demand in the short term. Meanwhile, smelter maintenance in March, coupled with high inventories of blister copper and anodes, resulted in a price inversion between tax-included recycled copper feedstock and finished products, pushing up production costs and compressing margins for recycled copper anodes. Profitability continued to decline into loss territory, with maximum losses reaching around RMB 1,000 per ton (excluding gold and silver credits), prompting some processors to delay production resumption or suspend operations.

Outlook for the Recycled Copper Market in Q2 2026

1. Price Trend: Likely to Stabilize and Rebound
In the second quarter of 2026, recycled copper prices are expected to bottom out and rebound. In the first quarter, affected by geopolitical tensions and tax policy adjustments, prices declined sharply, leading to subdued market activity and tighter supply. However, as geopolitical tensions ease and tax policies become clearer, along with continued tightness in copper concentrate supply and growing demand for recycled copper, prices are expected to gain support and show rebound potential.

2. Policy Focus: Far-Reaching Impact of the Reverse Invoicing Policy
Following the implementation of the reverse invoicing policy, its impact on the recycled copper market has been significant. In the second quarter, as the policy framework becomes clearer, enterprises will strengthen due diligence on individual sellers and dynamically track transaction volumes to mitigate the risk of fraudulent invoicing, while individual sellers will need to adapt to annual tax settlement and reconciliation obligations. Tax authorities are promoting the adoption of fully digital invoices and tax risk early-warning mechanisms to enhance regulatory efficiency, while optimizing the individual e-tax system to streamline the settlement process. After the transition period, the policy will enter a phase of nationwide unified enforcement, making the second quarter a critical window for enterprises to undergo compliance transformation.

3. Fundamentals Outlook

Domestic supply: In the second quarter, the spot TC index for copper concentrates is expected to remain at a low level, reflecting tight global copper mine supply. On the recycled copper raw material side, the earlier tightening in domestic circulation caused by price volatility and policy impacts is likely to ease. China’s “trade-in” policy will continue in 2026, and as scrapped materials from 2025 gradually enter the market and are absorbed by consumption—although not fully confirmed in Q1—domestic recycled copper supply is expected to increase, provided prices remain favorable.

Imports: As policies become clearer, the wait-and-see sentiment among downstream manufacturers is expected to ease, supporting stronger restocking demand. The market is showing a preference for tax-included recycled copper, sustaining robust demand for imports. With the recovery of import arbitrage advantages, traders are likely to actively rebuild inventories, and recycled copper imports are expected to show a positive performance in the second quarter.

Demand: Although the overall price level remains significantly higher than last year, the recent rapid drawdown in domestic inventories and notable declines in social stocks demonstrate the resilience of China’s copper consumption. Recycled copper demand is expected to remain optimistic in Q2. On the smelting side, tight copper concentrate supply is unlikely to ease in the short term, increasing smelters’ incentive to seek recycled materials as a supplement. With the gradual depletion of low-grade feedstock inventories in Q1 and a concentrated schedule of smelter maintenance in Q2, demand for such materials is expected to rise, as reflected by the recent reduction in long-term processing fees. On the processing side, recycled copper fabricators were significantly affected by policies in Q1, but demand is likely to restart in the second quarter.

Refined-scrap spread: Overall, recycled copper supply is expected to increase in Q2, while demand growth may remain relatively moderate. Under this supply-demand mismatch, the refined-scrap spread is likely to widen, allowing the economic advantage of recycled copper to gradually recover.

Source：  Mysteel