Tight supply coupled with rising sentiment to hold back from selling kept secondary copper prices resilient at high levels [SMM Weekly Review on Secondary Copper Raw Materials Outside China]

SMM, October 16:

This week, LME copper prices moved downwards after a higher opening overall. On Monday, LME copper prices opened at $14,543/mt, then pulled back in consolidation, touching a low of $14,256/mt at one point, and consolidated around $14,400/mt. In terms of copper scrap prices, as copper prices pulled back, the LME coefficient for ex-China copper scrap edged up slightly.

Currently, ex-China copper scrap supply remains tight, and this week's pullback in copper prices further strengthened some suppliers' sentiment to hold back from selling. Many ex-China suppliers remain relatively optimistic about the copper price outlook. Even with certain inventory on hand, they prefer to hold off on shipments and wait for better selling opportunities, further limiting the actual available supply in the market and providing support to the payable indicator for copper scrap.

From the Chinese market perspective, a large volume of tax-exclusive copper scrap still struggles to enter the compliant consumption system smoothly, while the scale of imported supply is temporarily not enough to fully bridge this supply gap. Against this backdrop, Chinese market demand for ex-China copper scrap will persist in the short to medium term, providing relatively strong support to global copper scrap prices. However, close attention still needs to be paid to the circulation policies and actual release of domestic tax-exclusive copper scrap. If previously blocked raw materials can re-enter the consumption system, the domestic supply tightness may ease notably, which could further affect China's import demand and bring phased impacts to global copper scrap prices and trade flows.

In terms of transactions, copper price fluctuations were relatively sharp this week, and trading enthusiasm among both buyers and sellers declined. Downstream enterprises became more cautious in procurement amid intensifying price volatility, while the pullback in copper prices further reinforced suppliers' sentiment to hold back from selling. Price disagreements between buyers and sellers widened, and overall market transactions were mediocre.

Looking ahead to next week, the current LME coefficient for ex-China copper scrap has gradually approached the phased high acceptable to downstream enterprises. Unless copper prices see a notable correction, there is limited room for the payable indicator to rise substantially further. On the other hand, if copper prices strengthen again, with tight raw material supply and persistent downstream rigid demand, the LME coefficient for copper scrap is likewise expected to be difficult to pull back notably. Overall, the payable indicator for ex-China copper scrap is expected to continue to consolidate at highs next week, with relatively limited room for adjustment in either direction in the short term.