Copper Prices Continue to Rise
This month, copper scrap recyclers and traders are navigating rising prices as the primary copper sector is facing potential supply challenges.
As of the newest closing date, copper prices differed slightly between the Comex exchange in the United States and the London Metal Exchange (LME). The value of copper closed at over $4.10 per pound on the Comex exchange, while the LME recorded a three-month closing price of $4.08 per pound as of last Friday.
Andy Home from Reuters highlighted how the surge in copper prices was attributed to the latest reports indicating that Chinese copper smelters had made a collective decision to reduce production because of a “significantly constrained” raw materials market.
Additionally, within the latest edition of “The Copper Report” released on March 15th, American analyst John Gross discussed how a group of prominent smelters in China “pledged to control capacity.”
In Gross’s view, the reduction in production levels does not directly hinge on the Chinese government’s acknowledgment of excess capacity. He suggests that the decision was driven “in response to a shortage of concentrates that have taken a severe toll on processing fees.”
However, both analysts agree that these reduction measures will not provide a lasting solution to the overcapacity issue. Home emphasizes the absence of “production cut” quotas among the nineteen Chinese operators involved in the collaborative meeting labeled as “collusion” by Gross.
“In 2013, China smelted 5.52 million metric tons [mmt] of copper contained in concentrates.” Then by 2023, the total amount increased substantially by 114 percent to reach 11.83 mmt., Gross reported. He also notes that there is a growing global demand for copper, which has lead to increased consumption and production across the world.
“Looking ahead, there’s still more capacity coming online,” Gross mentions, pointing out the upcoming launch of a new smelter in Indonesia by the U.S.-based Freeport McMoRan, which will add 1.7 mmt of capacity. In addition, Adani Natural Resources in India is scheduled to begin operations at its 500,000-metric-ton-per-year smelter this year, with further capacity expansions anticipated in Congo and Indonesia.
A Challenging Landscape
The impact of recycling efforts on primary copper price is currently limited. Data compiled by the International Copper Study Group (ICSG) in Lisbon at the end of the year revealed that in 2023, primary copper production exceeded secondary production by a ratio of almost 5 to 1.
Over the last year, the production of primary copper surpassed 22.3 million metric tons, with secondary copper production reaching over 4.55 million metric tons. Looking ahead to 2023, the global output of secondary copper accounted for 16.9 percent, showing a slight increase from its 2022 contribution of 16.35 percent.
Amidst a surge in exchange-traded copper prices, recyclers find themselves at a crossroads of potential profit boosts alongside the looming challenges of escalated freight insurance expenses and heightened vulnerability to price fluctuations during downturns. And in scrap yards, the value of certain copper and brass grades have had a major influence over the volume of materials coming in. These factors shape the demand for shredded copper-bearing grades and may face challenges increasing this season.
