Going with the ‘less than exciting’ flow

Despite the upward trend in copper pricing in the first half of this year, a number of factors have contributed to the metal’s decline in value as the year draws to a close.

Scott Greenberg, a senior trader based in Florida with C&Y Global Inc., headquartered in Houston, notes the red metal’s value spiked to a record high in May with help from its role in the green energy transition.

Speculation also played a part in copper’s climb, with a Reuters report from this spring saying the trading companies Trafigura of Singapore and IXM of Switzerland were looking to buy physical copper to deliver against large short positions on the COMEX.

“Despite the somewhat strong demand in the first half of the year, it’s estimated there still is a balance of 535,000 metric tons of copper this year.” – Scott Greenberg, senior trader, C&Y Global Inc.

Copper’s value has contracted during the third quarter but largely remains higher than in the past two years.

“Despite the somewhat strong demand in the first half of the year, it’s estimated there still is a balance of 535,000 metric tons of copper this year,” Greenberg says. “In addition, mined production of copper grows, putting downward pressure on the market. The surge of demand for green energy, however, has come off recently and may have been overstated in terms of the time frame of the increased demand.”

He says the flow of copper scrap has been “less than exciting” in the last four or so months, with lower steel prices having an effect, adding, “If steel prices are low, there is no incentive to bring in your steel to the yard; then they’re not bringing in their nonferrous, either.”

Greenberg says the shortage of red metal scrap has been met with “lackluster” consumer demand.

Ames Copper Group in North Carolina, a newer consumer of copper scrap, is putting pressure on the export market, he adds, and giving suppliers a way to avoid the potential problems associated with shipping material overseas. That pressure will increase when the new Aurubis smelter in Georgia and Wieland site in Shelbyville, Kentucky, are fully operational next year.

Despite that pressure, export demand remains “somewhat strong,” he says, though, “Malaysia’s advantage that they can take multiple items in containers has caused some problems,” with an excess of cargo causing port congestion and other delays, taking those buyers out of the market.

A late October announcement in China could increase the types of nonferrous recycled metal grades that can enter that nation’s ports, with traders indicating the policy could open the door for brass scrap and other alloys as well as more loosely define No. 2 copper.

But, in mid-November as the scrap import policy was taking effect, China’s Ministry of Finance said it would cancel a tax rebate that also affects copper and often is cited as contributing to overcapacity in its aluminum sector, potentially dampening scrap demand.