High copper premiums will exacerbate tight pricing of copper scrap – Triland

Copper recyclers should brace themselves for a sustained crimp in scrap pricing, as high copper premiums for cathode will keep that source of alternative supply blocked off, Triland’s head of sales Herwig Schmidt warned this week.

Copper recyclers should brace themselves for a sustained crimp in scrap pricing, as high copper premiums for cathode will keep that source of alternative supply blocked off, Triland’s head of sales Herwig Schmidt warned this week.

The availability and pricing of copper scrap has tightened sharply in recent weeks in response to lower copper prices, which dropped below $6,800 on an official basis on the London Metal Exchange on Thursday, breaking through the previous lows seen in April to trade at their lowest point since 2010.

The discounts offered for copper scrap have narrowed to the lowest levels seen since the end of 2008, when copper prices plummeted to $3,000 following the collapse of Lehman Brothers.

But the sourcing situation may be made more difficult for recyclers and fabricators this time around, as copper premiums are much higher than they were in 2008-09 and could rise further, Schmidt told delegates at the 2nd Metal Bulletin Copper Recycling conference in Dusseldorf.

“In 2008, when prices dropped you could go to the LME and pick up cathode, pay $5 to get the location right and then you had your copper, but that’s no longer the case,” he told delegates.

As with aluminium, the long queues to withdraw metal from London Metal Exchange sites are allowing warehouses to offer incentives of $100 and above to draw material into storage, meaning consumers have had to compete with them to secure material.

While warehouse buying has lifted copper stocks to ten-year highs of 665,000 tonnes, 85% of those stocks are concentrated in Johor, Antwerp and New Orleans, where there are long queues to withdraw metal.

As such, the LME is offering no relief during the spike in demand that has been caused by the tightening in scrap markets and declarations of force majeure at smelters in India and the USA.

“You have to now face a fact that has been a fact in the aluminium industry already for the last three years ... You might face as an industry a premium of more than $160 – you might face a benchmark of $200 or $300,” Schmidt warned on Wednesday.

This in turn will lead to a continued narrowing in scrap discounts, Schmidt said.

Millberry scrap is already trading level with the LME, and if premiums continue to rise then Birch/Cliff may also do so shortly, he said.

“This conundrum is very difficult, but I think you have to live with these discounts for some time to come,” he advised.

Mark Burton
mburton@metalbulletin.com
Twitter: @mburtonmb

What to read next
Any bolstering effect on US ferrous scrap exports from the up-month in February’s domestic trade will be tempered in the immediate aftermath of two earthquakes in Turkey — the country’s largest importing region — on Monday, February 6
Steel trading and production have come to a halt in the eastern Turkish region of Iskenderun following a devastating earthquake that hit the region on Monday February 6 and put mills in the area under force majeure, sources told Fastmarkets on Tuesday
A 120-day closure of four Illinois dams scheduled for 2023 will disrupt barge shipments and have potentially both negative and positive impacts on scrap and finished steel products from Canada to Texas
Market participants are cautiously optimistic about a rebound in iron ore concentrate premiums, with steelmakers around the world set to ramp-up production in line with an anticipated increase in demand for steel products, Fastmarkets understands
General Motors (GM) is investing $650 million to develop the Thacker Pass mine in Nevada, the largest known source of lithium in the US and the third largest in the world
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
Proceed