Improved Trading on Peak Season Expectations, Low Inventory Keeps Copper Scrap Coefficients High [SMM Weekly Review of Copper Scrap Outside China]

SMM, September 4:

This week, LME copper prices maintained a pattern of wild swings at highs. LME copper opened Monday at $14,368.5/mt, pulled back to around $14,092/mt mid-week, then rebounded to roughly $14,340/mt. In copper scrap prices, when copper prices pulled back mid-week, LME payable indicators for copper scrap outside China edged up slightly; as copper prices returned to highs, LME payable indicators did not pull back notably, showing strong resilience overall.

LME payable indicators for copper scrap outside China stayed high, with the core support still coming from a tight supply landscape. Copper scrap inventory in major consuming regions is generally at low levels, new supply releases are limited, and with the traditional September peak-demand season approaching, downstream demand has shown signs of warming, supporting copper scrap prices.

On the other hand, the current LME copper term structure remains in a backwardation structure, and spot premiums for copper cathode are high, further widening the quoting room for some traders. For traders with certain inventory, capital, and term-structure operating capacity, the backwardation structure and high spot premiums can generate operational gains, thereby raising the payable indicators they can accept when purchasing copper scrap based on LME 3M, which has also become one of the key reasons overseas copper scrap payable indicators have stayed firm recently.

In terms of transactions, with the traditional peak-demand season approaching and some downstream enterprises holding relatively optimistic expectations for copper price trends, market inquiries and purchasing sentiment improved this week compared with before. However, with copper prices and copper scrap payable indicators both at highs, downstream procurement costs are elevated, which also limited further expansion in actual transactions. Overall, market trading activity improved from prior levels this week, with the trading atmosphere at a moderately warm level.

Looking ahead to next week, with macro conditions still highly uncertain, expectations for further rate hikes cooling, and some pressure on the US dollar, copper prices still have the potential to hold up well. For copper scrap, low inventory and a tight supply landscape are unlikely to improve significantly in the short term, and with peak-season demand gradually rebounding, LME payable indicators for copper scrap outside China are expected to remain resilient; even if copper prices continue to rise, room for a sharp pullback in payable indicators will be limited.