Copper price hikes may no longer lead to huge rise in availability of scrap

The recent surge in copper prices might not lead to swathes of scrap being suddenly released into the market, as happened after a similar situation nearly a decade ago, sources told Fastmarkets this week.

With the copper price recently reaching a multi-year high, all eyes are on whether scrap collectors will release a massive amount of secondary material into the rising market. 

In 2011, when the copper price rose above $10,000 per tonne, scrap dealers released huge volumes of legacy scrap into the market to cash in on the rising prices.

The opposite happened when copper prices plummeted rapidly in March this year, with scrap suppliers reluctant to sell spot cargoes at that time.   

On the demand side, a higher copper price could also lead to buyers actively looking for cheaper substitutes for refined copper. Fabricators could use the discounted pure grade scrap as a cost-effective input option, for instance. 

On Tuesday December 1, three-month copper futures in London rose to a seven-year peak of $7,743 per tonne and investment bank Goldman Sachs said there is now enough upside in the red metal price to predict a 12-month target of $9,500 per tonne, citing the robust recovery from Covid-19 in China. 

While there is no official measurement of copper scrap inventories and whether the bullish outlook for the copper price will result on more copper scrap becoming available is not clear, according to trader Michael Lion of Hong Kong-based Everwell Resources.

On the outlook for recyclable copper, Lion, who is the former chairman of Sims Metal Management Asia, said: “These days, there are no longer people holding big… inventories in the scrap industry – like [they would have done] 20 to 30 years ago when the industry was dominated by family businesses. So the increase in prices does not do that much in [terms of] drawing out much more material. And [the copper scrap that] can come out, comes out anyway. 

“As the price increases, costs also increase. Capital has to be increased to trade copper scrap [when the copper price rises], so [that is a] negative factor,” Lion added. 

The hike in costs could put an extra strain on scrap traders amid a global tightening in commodity financing, with several credit providers to commodities businesses posting significant impairment losses

What to read next
The growth in Chinese shipments of batteries for energy storage systems (ESS) is far outstripping the growth in deliveries of batteries for electric vehicles (EVs), sources told Fastmarkets in the week to Friday November 1.
After a consultation period, Fastmarkets has discontinued the price due to a lack of liquidity and production of the commodity. All short-term forecasts associated with this price produced by the Fastmarkets research team, if any, have also been discontinued. If you have any comments on the discontinuation of this price, please contact Zihao Li by email […]
Quarterly figures released by global miner Glencore on Wednesday October 30 showed that zinc concentrate output was dropping in a tight market while overall nickel output was down despite an increase in briquettes.
Steel leaders from throughout Latin America gathered during October 29-31 in Buenos Aires, Argentina, at Alacero Summit 2024 to learn more about the region's growing importance in the global steel market
On Thursday October 24, the US Department of Treasury and the Internal Revenue Service (IRS) released the final rules regarding the Section 45X credits under the US Internal Revenues Code. The final rules clarify definitions and confirm credit amounts for eligible components, including solar and wind energy, inverters, qualifying battery components and applicable critical minerals. […]
In late September, the People’s Bank of China (PBOC) announced a cut in the existing mortgage rate by an average of 50 basis points.