Origins of copper price boost still up for discussion

Nonferrous metals recyclers are contending with price volatility on the world’s terminal markets this spring, and why the volatility has been rampant and whether it has peaked remain topics of discussion in the red metals sector.

Up and down—but mostly up—pricing and larger than normal spreads between copper’s price on the United States-based Comex, the London Metal Exchange (LME) and the Shanghai Futures Exchange (SHFE) have caused buyers and sellers of red metal scrap to pay even more attention to the price of copper.

In his May 24 edition of The Copper Journal, New York-based analyst John Gross characterized bullish copper forecasts (one speculating that copper could reach $18 per pound in a given scenario) by saying, “There is no clear line of distinction between news or rumors that may or may not be accurate.”

Both Gross and John Browning of Hong Kong-based BANDS Financial have pointed to traders’ arbitrage opportunities as playing a role in this year's copper pricing. For such opportunities to be exploited, however, they have to exist, Browning says.

In a late-May edition of his e-newsletter, Browning examines the warehouse inventory levels of copper at the three exchanges contrasted with their initial margin (IM) percentages. At times this spring, he indicates, “Comex had remarkably less physical stock than the other two exchanges” at the same time its IM percentage was lower than the LME’s or the SHFE’s.

Subsequently, Comex has made several adjustments. The temporary low-IM, low-inventory situation, however, brought to mind for Browning the LME nickel market fiasco of 2022. “The LME’s less than 2 percent IM for nickel on the day before the LME nickel market blew up is the only case study you need to read,” he writes,

In the case of copper in 2024, bullish scenarios most often point to electrification and other aspects of a “green transition” when making the case for copper being in short supply.

Gross commented earlier in May (as Browning also notes) that there does not seem to be a copper shortage in China, the nation that consumes the highest volume of the red metal. Metal recyclers know one reason why, even if policymakers in the U.S. seem less familiar with the global scrap trade.

Gross tells Recycling Today he sees no reason why more recycled-content copper production capacity—beyond several projects already underway—should not be attracting investor interest.

Although environmental restrictions on existing refining methods are cited as a leading culprit of the demise of secondary copper production in the U.S., Gross says, “I have been of the opinion that the importance of copper and copper recycling in the United States would be well served by the combined and coordinated efforts of industry, government and academia working together to find the right solutions to this ‘problem.’

“I suspect there are many students at MIT [the Massachusetts Institute of Technology] and other universities who can come up with new ideas and new technologies to make copper recycling environmentally safe, economical and a dependable source of future needs. If we can send astronauts into space and they can spend a year there, then we should be able to develop the technologies to process critical minerals here on Earth.”

In the meantime, Gross tells Recycling Today, “Scrap copper and other materials are going to the highest bidder, and that has been China, except when they put a halt to imports a few years ago.

“From a macro point of view, it makes no sense for the U.S. to be exporting nearly a million tons of copper scrap and importing and importing nearly a million tons of refined copper.”