[SMM Analysis] High Copper Prices Weigh on Demand as Payable for Copper Scrap Diverge

In the first half of August, LME copper prices remained at elevated levels. Prices rose rapidly from around $13,850/mt at the beginning of the month before moving into a high-level consolidation range of roughly $13,950-14,280/mt. While strong copper prices continued to support global copper scrap values, the prolonged rally also gradually weighed on downstream purchasing activity.

Global copper scrap payabilities stayed relatively firm overall, but divergence among different grades became increasingly evident. Tight supply and low inventories across major consuming markets, including China, Japan, South Korea and India, continued to provide strong support to high-grade scrap. Bare bright copper quotations remained around 98.5%-99% payable throughout the period, showing little sign of weakening.

By comparison, No.1 and No.2 copper materials came under greater pressure. Smelter maintenance, seasonal weakness in downstream demand and historically high copper prices led buyers to reduce procurement volumes and focus mainly on immediate production needs. By mid-August, No.1 copper payabilities had eased to around 96%-97%, while US No.2 copper materials traded near 95.5% and European No.2 copper materials around 94.5%-95%.

Trading activity also weakened as the month progressed. At the beginning of August, rising copper prices encouraged more suppliers to release material, but tight spot availability kept sellers relatively firm on prices. Downstream buyers, however, remained cautious and showed little willingness to build inventories. As copper prices stayed high, some traders facing cash-flow and inventory turnover pressure became more willing to offer discounts, contributing to the softer performance of No.1 and No.2 copper materials.

Fundamentally, supply tightness remains the main support for the global copper scrap market. Limited availability of tradable material, combined with relatively low inventories in major consuming regions, continues to underpin high-grade scrap. Bare bright copper has received additional support from its strong substitutability for refined copper, helping its payable remain resilient even as demand for lower-grade materials softened.

Looking ahead to the second half of August, downstream buyers are expected to maintain a just-in-time purchasing strategy as copper prices remain high and seasonal demand stays relatively weak. Bare bright copper payabilities are likely to remain elevated on tight supply, while No.1 and No.2 copper materials may continue to face mild downward pressure. Overall, the market is expected to remain divergent, with high-grade scrap staying firm while lower-grade materials remain relatively weaker.