LONDON High-grade copper scrap prices are trading at a premium to Comex tags in the U.S. market following a sharp swing lower in refined metal prices, sources told AMM sister publication Metal Bulletin at the Center for Copper and Mining Studies annual Cesco Week in Santiago, Chile.
Spot copper prices slumped to $3.3255 per pound on Comex last week, the lowest point since June, as funds built record short positions in the U.S. copper contract.
On the London Metal Exchange, prices dipped below $7,400 per tonne earlier this month, down nearly $1,000 from this years highs in February.
The sharp drop in prices over the past two months, which has coincided with a dramatic rise in visible cathode inventories, is already having an impact on scrap prices and some sources said certain grades have traded as much as 1 cent above Comex prices.
"We are at that point now with prices where scrap supply is starting to be withdrawn from the market and in some cases is even trading at a premium," a producer source said.
AMMs copper scrap discounts have tightened considerably in recent weeks as market participants said the combination of weakening terminal markets and an ongoing supply crimp was squeezing the market, with brass mills No. 1 copper scrap narrowing to 3 to 5 cents below Comex April 3 from a 4- to 6-cent discount a week earlier (amm.com, April 4).
"I have not seen a premium, but we have sold bare bright copper at close to Comex on a delivered basis. There is virtually no material available," one U.S. scrap trader said.
While prices have fallen, it still puts a considerable strain on working capital requirements for copper scrap merchants, and holding back material for long stretches can cause cash flow problems for smaller operators.
"Prices might be lower, but youve still got to have deep pockets to hold out," one scrap buyer told Metal Bulletin in Santiago.
In the European market, copper scrap supply can tighten in a knee-jerk fashion if the price falls quickly, but offers for material re-emerge shortly afterwards as working capital strains encourage suppliers to release material, Peter Willbrandt, chief executive officer of Hamburg, Germany-based Aurubis AG, said last month. "If the copper price drops a few hundred dollars then there is a reaction, but typically it is only for a few weeks and then it normalizes," he said.
A version of this article was first published by AMM sister publication Metal Bulletin.