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Copper mine outage sparks shift to scrap

Keywords: Tags  copper scrap, scrap demand, Kennecott Utah Copper, No. 1 copper, No. 2 copper, bare bright, Bingham Canyon Mine, Barbara O'Donovan


NEW YORK — Domestic copper consumers that can use high-grade scrap are "scrambling" to find out about its availability in the wake of an outage at Kennecott Utah Copper’s Bingham Canyon Mine.

"We’ve had some scrap buying. Those that can take scrap as well as copper cathode are looking to ramp up their buying," a scrap broker source told AMM.

Kennecott, a division of Rio Tinto Plc, declared force majeure earlier this week after an April 10 wall slide forced it to suspend mining at the Utah mine ( amm.com, April 16).

Purchases so far have been limited as some take a wait-and-see stance, but sellers expect sales to spike as Kennecott’s inventories run down.

"(Some) want to get in before the spreads get way out of whack," the scrap broker source said.

The higher demand combined with lower Comex copper prices served to reduce discounts on high-grade copper scrap.

The discount for brass mill No. 1 copper scrap has narrowed to 1 to 3 cents per pound below Comex from a 3- to 5-cent discount a week earlier, putting prices at $3.16 to $3.18 per pound based on a May-delivery Comex copper contract settlement price of $3.1875 per pound April 17.

The Comex price is down 6.7 percent from $3.418 per pound a week earlier as the market takes its lead from economic sentiment rather than supply and demand fundamentals, sources said.

The price decline has led market participants to predict more trades will take place at a premium to Comex following one unconfirmed sale by a broker last week at 2 cents above the July Comex price.

Kennecott customers aren’t guaranteed deliveries after May, according to the force majeure notice. This will mean consumers will continue to look for alternative sources of feedstock.

Copper cathode inventories in London Metal Exchange-listed warehouses, while high, aren’t a guaranteed source of material, market participants said ( amm.com, April 18). Queues to get copper out of approved warehouses in New Orleans are at about five months, while consumers would have to wait more than a year to get their hands on material in Detroit warehouses, traders said.

"Even if warehouse stocks are high, most agree that it takes way too long to get metal out," a second broker said.

Continued scrap supply tightness helped narrow the discounts on other grades of copper scrap in the face of declining Comex copper prices and a slightly improved demand outlook.

The discount on refiners No. 1 copper scrap has declined to 9 to 11 cents per pound from 12 to 14 cents previously, putting prices at $3.08 to $3.10 per pound vs. $3.28 to $3.20 per pound April 10. The refiners No. 2 copper scrap discount moved to 27 to 29 cents per pound from 30 to 32 cents previously.

"(The discounts) are all coming in. Supply is pretty darned tight and demand is slightly better than it was," a third scrap broker said.

Brass ingot makers’ copper scrap is following a similar trend, with the discount for bare bright material falling to 4 to 6 cents per pound from 6 to 8 cents previously, and the discount for brass ingot makers’ No. 1 copper scrap at 13 to 15 cents per pound, down from 15 to 17 cents.

Ingot makers are having to compete with exporters for No. 2 copper scrap, the second broker said. As a result, the discount for No. 2 narrowed to 27 to 31 cents per pound from 30 to 34 cents previously.

Barbara O’Donovan

bodonovan@amm.com


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