The US copper scrap market is largely in a temporary freeze following a plunge in Comex copper prices, although while some buyers have taken to the sidelines, others are taking a proactive approach amid fears that more paper has been traded than metal.
“It’s a tough situation now. We’ve seen more paper with a little bit of our orders for No. 1 and No. 2 copper,” a US second consumer said, also noting more activity in the spot market as a result.
Anyone who sold paper could lose money, as they might have to pay more than expected to fulfil the obligation, a US supplier source said. “People may have sold paper. Now that the market has dropped, if they did sell paper they may be [in trouble] because scrap seems relatively tight for copper grades,” this source said.
“Some of the mills are starting to come back a little bit, but not in a great rush. It seemed for a minute there was pressure, but we continue to pick up metal at our spreads,” a second US supplier said.
The July-delivery Comex copper contract settled at $2.5435 per lb on May 3, down 4.4% from $2.6605 per lb on May 1 and off 2.2% from $2.6005 per lb. on April 26.
Refiner’s No. 2 copper discounts dropped a cent due to firm competition at home and abroad, while prices for brass ingot makers’ No. 1 composition solids as well as composition borings and turnings jumped 3 cents per lb due to supply tightness, according to Metal Bulletin sister title AMM’s latest assessment.
Market participants have been shifting to the sidelines more regularly over the past month due to substantial volatility on Comex.
Despite the tumble, most copper and brass scrap discounts remained unchanged, with market participants opting to not overreact to the fluctuating markets until some direction emerges.
“The key is to not overreact. As radical as the market move was, we remain range bound. But if we break out of this range, then we’ll look really carefully. Right now there’s really no reason to,” a third US consumer said.
“I have no clue on what I’m quoting with a day like [this],” a fourth US consumer said on Wednesday. "We’re not trying to take any positions until at least [Thursday], so let’s see what happens [then]."