Copper price soaring in March

Copper scrap recyclers and traders are finding themselves in a landscape of rising prices this month, with potential supply issues on the primary copper side being cited as the main factor.

The value of copper on the Comex exchange in the United States closed at more than $4.10 per pound March 15, while London Metal Exchange (LME) copper is carrying a value of $4.08 per pound as a three-month closing price as of last Friday.

In a mid-March writeup, Andy Home of Reuters says copper’s gains in value last week were triggered by news that China’s copper smelters have agreed to curb output in response to a much tighter-than-expected raw materials market.

U.S.-based analyst John Gross, in his March 15 edition of “The Copper Report,” describes it thusly: “[A] consortium of major smelters in China 'pledged to control capacity' (it would be called collusion here).”

Gross says the output cuts are not necessarily tied to the Chinese government acknowledging overcapacity. Rather, he writes, the arrangement has been made “in response to a shortage of concentrates that have taken a severe toll on processing fees.”

Both analysts describe copper smelting and refinery production in China as being in an overcapacity situation that this temporary cutback will not address in any long-term sense. “There are no quotas for production cuts," Home says of the 19 Chinese copper smelter and refinery operators who took part in the mid-March meeting Gross describes as “collusion."

“In 2013, China smelted 5.52 million metric tons [mmt] of copper contained in concentrates,” Gross says. By 2023, that figure grew by 114 percent to 11.83 mmt.

The rest of the world also now consumes and produces more copper, and continues to do so, according to Gross.

“Looking ahead, there’s still more capacity coming online,” Gross says, adding that U.S.-based Freeport McMoRan’s new smelter in Indonesia will have 1.7 mmt of capacity when it starts up. As well, Adani Natural Resources in India will commence production at its 500,000-metric-ton-per-year smelter this year, while yet more capacity is expected in Congo and Indonesia.

The extent to which recycling activity can influence the primary copper price remains limited. Year-end copper refining statistics gathered by the Lisbon-based International Copper Study Group (ICSG) show primary copper production outpaced secondary production by nearly a 5:1 ratio in 2023.

Last year, more than 22.3 mmt of primary copper were made, while secondary copper checked in at more than 4.55 mmt. In 2023, secondary copper comprised 16.9 percent of global output, up slightly from its 16.35 percent contribution in 2022.

When exchange-traded copper prices surge, recyclers can have an opportunity for increased profit margins but also can face higher freight insurance costs and greater exposure to price volatility on the downside.

At yards, higher scale prices can attract greater inflows of some copper and brass grades. However, shredded copper-bearing grades may not be so easy to ramp up this spring. Stagnant-to-falling scrap iron prices, unfortunately for traders seeking copper, are the main factor when scrap yards buy obsolete vehicles and appliances.