Copper Prices Rose, Copper Scrap Holders Sold at High Prices [SMM Analysis]

This week, influenced by the rising expectations of a US Fed rate cut and the increased pre-holiday stocking demand domestically, the copper prices rose by 1,400 yuan/mt, and the prices of copper scrap increased by 900 yuan/mt. The tight supply of copper scrap has not eased, and this week, some secondary copper rod plants even reported that it was almost impossible to purchase low-priced copper scrap in the market. As of Thursday, the purchase price of bare bright copper by secondary copper rod plants was 67,500-67,800 yuan/mt, but the actual transaction price in the market was 68,200-68,400 yuan/mt, indicating that copper scrap holders significantly raised prices due to the tight supply. Additionally, some secondary copper rod plants reported that the usual price spread between copper cable scrap and bare bright copper was typically 200-300 yuan/mt, but it has now widened to 400-500 yuan/mt, causing significant distress for many secondary copper rod plants due to the high raw material prices. Furthermore, the tight supply of copper ore for smelters remains unresolved, and the demand for externally purchased copper anodes has not decreased. Some smelters in north China have even gone to south China to seek copper anode supplies. However, secondary copper rod plants indicated that the delivery of long-term orders for copper anodes is constrained by the tight raw material supply, leaving no capacity to handle spot orders, even though the processing fee for spot orders is more favorable than for long-term orders. Therefore, in addition to competing for copper scrap among themselves, secondary copper rod plants are also indirectly competing with smelters for copper scrap.

This week, the CIF price for secondary #1 copper was at a discount of 15-16 cents/lb against December COMEX copper cathode contract, and the CIF price for secondary #2 copper was a discount of 20-21 cents/lb against December COMEX copper cathode contract. The price for US refinery brass (66.5-67% against LME) was fixed at $6,100-6,120/mt (with limited transactions). The CIF price for copper granules (Cu 98.5%) was at 96-96.25% against LME, and the CIF price for bare bright copper was at 97.75-98.25% against LME.

If the US Fed's rate cut in September leads to a rise in copper prices, coupled with an increase in the number of secondary copper rod plants resuming production, the demand for copper scrap will increase, prompting copper scrap holders to release more cargoes. However, even with the simultaneous increase in supply and demand for copper scrap, the issue of tight copper scrap supply may still not be resolved.