Reuters reported that the market for copper scrap is set to tighten as competition for the secondary raw material, eagerly sought as a cheaper alternative to refined copper cathode, rises globally.
Mr Marc Kaplan president of US based Mews Metals Trading said that "Every consumer and trader is running around chasing the same piece of scrap. The consumers have let their inventories run down, so if the recovery is coming they are all nervous they won't have enough scrap."
In addition, merchants and fabricators say China the world's top copper consumer is likely by the year end to resume its habit of importing as much scrap as it can get its hands on. This could create a problem for European and US fabricators who along with the Chinese are starting to increase production in response to improved order books.
A scrap buyer for one of Europe's top producers of copper and copper products said that "At the moment the Chinese are not interested in cathode or scrap but we expect to get them back. Nobody knows when October, November and December, at some stage they have to buy because demand is there."
Scrap which accounts for more than a third of the world's copper needs, was in extremely short supply at the start of the year, prompting China to import a record 1.8 million tonnes of the more expensive refined copper cathode in the H1.
The restocking meant copper prices surged as early as the Q1, when global equities were still suffering the effects of recession.
Latest Chinese data showed that August cathode imports fell 42% from June's record high and although scrap imports raised 41% this was skewed by the fact that customs cleared a backlog in Guangdong port. In other words, scrap orders were relatively subdued over the summer but they have been improving overall since the Q2 while cathode imports have started to decline sharply. However, many in the market believe China will be hard pressed to replace some of its cathode needs with scrap this year, even though global scrap supply is improving thanks to higher copper prices and recovering manufacturing activity which generates scrap as a byproduct.
Mr Rob Stein marketing VP for Alter Trading Company said that "I expect Chinese scrap imports will level off going forward because there isn't enough copper scrap in the global system." He said that scrap discounts usually widen out when the market is well supplied with scrap. But this has not happened.
A purchasing manger at one of the world's largest copper fabricators said that "Production at fabricators in Europe has improved because they have higher order books. Destocking is over with customers of fabricators have to buy what they need."
(Sourced from Reuters)
