Copper Scrap Supply Keeps Improving with Copper Cathode Prices Remaining High

SHANGHAI, Aug 23 (SMM) - From August 15 to August 21, the copper scrap throughput of East China Nonferrous Metals City was about 17,100 mt, a week-on-week increase of 33.11%. According to SMM data, the weekly average price of #1 copper cathode was 62,487 yuan/mt from August 15 to 19, an increase of 424 yuan/mt or 0.68% over the previous week. The weekly average price of bare bright copper in Linyi Metal City, Shandong Province was 57,520 yuan/mt, an increase of 240 yuan/mt or 0.42% from the previous week, and the growth has slowed down. The domestic weekly average spread between copper cathode and scrap stood at 700 yuan/mt, expanding 381 yuan/mt compared with a week ago.

The price of copper cathode remained high last week after rebounding for several weeks in a row. Cargo holders of copper scrap took profits at highs, releasing some of the high-priced inventories, and the supply of scrap continued to improve. However, the raw material inventory held by downstream secondary copper rod enterprises was running out, and they were in urgent need of restocking. As such, the scramble for scrap was still fierce. At present, overseas copper traders still suffered losses based on their old inventory. In addition, as overseas market has walked out of the shadow of covid-19 pandemic, the demand for copper scrap was high. Therefore, the imports of copper scrap fell 6% MoM in July. In the short term, the supply elasticity of copper scrap is still weaker than the demand. Nonetheless, the supply has already improved to some extent, evidenced by rising secondary copper rod operating rates which added 3.68 percentage points on a weekly basis to 41.49% during August 13-19.

It is expected that the throughput of copper scrap in East China Nonferrous Metal City will continue to increase this week, but the growth will be limited. As of August 23, the premiums of secondary copper rod stood at 280 yuan/mt in Jiangxi over SHFE front-month contract, a sharp drop from a week ago. In addition, the premiums of copper cathode are now close to 600 yuan/mt in east China under the background of extremely low copper cathode inventory, limited imports as well as restricted production due to power rationing in Hubei, Anhui, Jiangsu, Zhejiang and other provinces, and the fabrication charges are also above 1,000 yuan/mt. In this case, the cost efficiency of secondary copper rods is gradually surfacing, and the new orders also pick up with mounting demand from local infrastructure projects. If copper prices stay high, the cargo holders will be more willing to sell. And the throughput of East China Nonferrous Metal City is expected to increase slightly this week. But the increase will be limited as the sources of copper scrap are still tight.