US export copper scrap spreads began to widen this past week on the strength in the Comex market and lower demand from China.
China’s scrap quotas for copper imports have dropped since the fifth batch allowed over 200,000mt of scrap into the country. The volume is spread across 140 companies. Batch six allowed just over 2,000mt of copper scrap for six companies, and batch seven allowed 10,500mt from 14 companies.
The decreasing quotas from China have meant that US exporters are now shifting sales into countries like Malaysia because of which the market has adjusted by widening spreads against a much stronger Comex market.
The next active Comex contract closed on Wednesday at $2.657/lb, up 16¢/lb from $2.49/lb on June 3.
The weekly Davis Index for #1 copper wire and tube increased by 16¢/lb to $2.52/lb fas US port, while the index for #2 copper jumped by 17¢/lb to $2.37/lb fas on Wednesday. The index for bare bright (barley) increased by 16¢/lb to $2.57/lb fas US port.
The Davis Index spread for #1 copper wire and tube (berry/candy) was wider at 11.8¢/lb fas US ports under the next active Comex contract, while the spread for #2 copper (birch/cliff) widened by 0.7¢/lb at 29¢/lb fas US port, under the next active month on Comex. The spread for bare bright (barley) was worse by 0.9¢/lb at 8.4¢/lb fas under the next active Comex contract.
Spreads began the week strong but started losing ground thereafter. Market participants expect the trend to continue for export grades, especially for #2 scrap grades, while supply remains tight for #1 scrap grades in the US.
The initial recovery after the shutdowns in China tipped the scales towards supply-driven pricing. Now that the market in the Asian country has purchased enough scrap to balance its current demand, the next pricing move will have to come from the demand side of the equation, leaving China reliant on the rest of the world to open back up and increase consumption.