[SMM Overseas Copper Scrap Weekly Review] Copper prices drifted higher, while tight supply supported the discount to buck the trend and rise.

SMM July 10:

This week, LME copper prices drifted higher. On Monday, LME copper opened at $13,365/mt and then edged up slightly. Notably, despite a certain rise in copper prices, discounts quoted for copper scrap outside China did not pull back accordingly but instead saw a slight increase. This week, mainstream quoted discounts for copper scrap outside China generally rose by about 0.2 percentage point. Among them, bare bright copper saw relatively limited gains as its current quotations were already close to the high range acceptable to most traders; discounts for No.1 copper semis and No.2 copper semis generally edged up by about 0.2 percentage point.

The simultaneous rise in copper prices and discounts was mainly supported by marginal improvement on the demand side and tight supply. On the one hand, China, the world’s largest consumer of secondary copper, recently saw enterprises step up purchases of copper scrap outside China due to tight domestic bill conditions, which led to a rebound in offers and in sentiment to hold prices firm outside China. On the other hand, supply of copper scrap outside China remained tight, with limited available cargoes in the market, and suppliers showed strong willingness to hold prices firm. Against the backdrop of tightening supply, even as copper prices edged up, quoted discounts for copper scrap outside China remained supported and inched higher.

In addition, some enterprises held a relatively optimistic view on the near-term copper price trend, which further improved market buying sentiment. Compared with last week, demand showed a slight improvement this week, with increased inquiry and trading activity. However, the impact of the traditional consumption off-season persisted, and downstream purchases had yet to see a significant increase in volume; the improvement in trading was relatively limited.

Looking ahead to next week, copper prices are expected to continue to consolidate at highs and drift higher. High discount rates will boost suppliers’ willingness to sell to some extent, but due to the traditional off-season, a large volume increase in demand is unlikely in the short term, and overall trading is expected to improve modestly. On the discount side, given the tight supply of copper scrap outside China and still-existing demand support, even if copper prices continue to strengthen, quoted discounts for copper scrap outside China are unlikely to see a notable pullback, and are expected to stay high in the near term.