ISRI2024: Copper makes gains

The price of copper began to climb in March, and the momentum continued through much of April, with the price retracting somewhat following Iran’s missile attack on Israel. However, one analyst said we could see lower pricing for the metal as the second quarter concludes despite some tightness in the market.

External influences

Edward Meir of New York-based Marex, a diversified global financial services platform, speaking at the Institute of Scrap Recycling Industries (ISRI, which has been renamed to the Recycled Materials Association, or ReMA) 2024 Convention & Exhibition in Las Vegas in mid-April, said pricing climbed recently in response to news that the London Metal Exchange (LME) and Chicago Mercantile Exchange (Comex) have banned the exchange of Russian metals in response to restrictions the U.S. Department of the Treasury and its U.K. counterpart, the HM Treasury department, announced on the trading of Russian aluminum, copper and nickel.

Meir described the reaction as “overdone,” noting the announcement doesn’t have much of an impact given the relatively small amount of Russian copper on the LME. “It’s a nonevent, in my view," he says. "The only caveat is that no one can deliver it to LME, but since the metal wasn’t going to the exchange to start with, it’s kind of a moot point.”

Copper pricing was climbing before these events because of developments coming out of China.

“I refer to the fact that 15 Chinese smelters announced that they will be cutting their refined production," Meir said. "In other words, they said they're not going to keep producing any refined cathodes because their treatment charges have collapsed and it's just not profitable for them to do so.”

ReMA Chief Economist Joe Pickard said China has been the major driver in the copper price developments. The country’s imports of recycled copper and copper alloys from the U.S. increased 49.2 percent in the first two months of this year to 69,792 metric tons compared with 46,772 metric tons in the same period in 2023, making China far and above the largest importer of this material. The second largest importer is Canada at nearly 14,300 metric tons for the first two months of this year.

He and Meir pointed to good manufacturing data coming out of China as well as the U.S. for March.

According to Pickard’s presentation, the Institute for Supply Management reports its U.S. Manufacturing Purchasing Managers' Index, or PMI, increased from 47.8 in February to 50.3 in March, indicating the manufacturing sector expanded after 16 months of contraction.

He added that next to tin, copper has been the best performer of the base metals so far this year.

Supply and demand

While Marex initially forecasted that copper would be in a surplus this year, as of April, “Things look tight in copper," Meir said. "We earlier had expectations of a 300,000-to-500,000-ton surplus in copper for this year. That estimate has been cut in half. Some people are looking for a balanced market; some people are even looking for a deficit.”

Marex sees “a mostly balanced market” for 2024, with tightness on the concentrate side. “Ironically, you're not seeing the tightness come in on the refined side on cathodes," Meir said.

“The situation on the concentrate mining side isn't really spilling over into the refined market. If this supply shortage is in fact real, we're going to start to see these two markets kind of converge. The spreads will need to come in, the scrap discounts will need to narrow, inventories will have to fall, especially in China, and the treatment charges, which are already very low, I think will go to negative territory, so smelters will pay to get more of it.”

If this convergence doesn’t occur, Meir said, “Then we can deduce that demand is the issue. Demand is offsetting the tightness we're seeing on the supply side. And the demand weakness could come from China if their economy continues to contract. It could also be generated by a slowdown in global  manufacturing, especially now that interest rates seem to be stickier.”

He also pointed to what he said is a slowdown in the green sector, which includes solar energy and electric vehicles. Meir said China is flooding the market with solar panels and electric vehicles.

Despite that, he said copper is well-positioned because, unlike many EV battery materials, it cannot be easily substituted.

Meir cited a statistic that roughly 620 million tons of copper have been used so far and that 1.2 billion tons are going to be needed by 2050. “Everybody that we’ve talked to has acknowledged that, given the current course of the global economy and the push governments are making towards green energy, we certainly need more copper.”

Despite that long-term growth potential, Meir said the market likely will remain firm this year. “We thought we would see a rally during the second half of the year. It's obviously happened earlier.”

CDA initiatives involving recycled red metals

Also speaking during the Spotlight on Copper was Adam Estelle of the Copper Development Association (CDA), McLean, Virginia. Estelle said that while the CDA’s members are largely copper mines and brass mill, wire mill and foundry fabricators of copper and copper alloys with production facilities in the U.S., its members have been talking more about scrap and recycling. 

He said CDA is working to facilitate collaboration between scrap buyers and sellers by building connections in the market.

“You might recognize CDA from our ongoing efforts to try and get copper added to the U.S. Geological Survey’s critical minerals list," he said. "So, the United States really has a tremendous opportunity to secure our future supply of copper—the metal of electrification. It is very instrumental in everything from the clean energy transition to decarbonizing other industries to replacing lead service lines for our water infrastructure, for example, and many other great things,” Estelle said. He added that getting on the critical minerals list would provide immediate tax benefits but essentially is a codeword for important minerals on Capitol Hill in U.S. policy.

“On the primary side, there's a strong need for permitting reform. And on the secondary side, there's a lot of opportunities for new recycling initiatives and things like that to help us improve our domestic secondary supply,” adding that megatrends are leading to steep supply challenges.

Of the 1.57 million metric tons of copper recovered for recycling in the U.S., 50 percent, or 798,000 metric tons, are exported. “But, don't worry; I'm not here to challenge the export markets," Estelle said. "I'm really here to challenge our domestic value chain to work together with our elected officials and our policymakers to help us build our domestic processing capabilities and capacity, so we can actually process those units and keep them here in the United States.”

Estelle noted the U.S. primarily exports recovered brass and copper alloys, with much of the new secondary copper capacity being installed in the U.S. targeting No. 2 copper. “We’ve got a potential huge opportunity for these lower grades in the alloy space that we're exploiting because we currently don't have the right capabilities here," he said.

He added that the CDA wants to create a more resilient and self-sufficient domestic copper supply chain and doing so requires an approach that addresses primary and secondary copper production.

The CDA and its members also are trying to develop material flow models that take into account mining and extraction through fabrication to recycling, Estelle said, as they could help improve diligence on the recycling narrative and indicate recycling opportunities that could be missing, such as the copper lost in automotive recycling, that warrant opening up a dialog between the industry and various segments of the value chain.

Contamination in red metal recyclables also is an issue CDA is investigating, with Estelle noting that bimetallic contamination is growing. He said the average cost of inspecting external scrap was $30,000 per company per month, with furnace events from undetected contamination costing $60,000 per company per month, resulting in “significant business impacts.”

The CDA also is working on scrap specifications, with Estelle clarifying, “I'm not talking about reinventing the wheel and redefining scrap grades—ISRI has a terrific specification system for that.” Instead, he said, this involves collection, sampling, testing, inspection and quality control, with an ASTM subcommittee working to bring together buyers and sellers of recovered red metals to identify and document best practices. The CDA is working to finalize two documents this year: one on using hand-held XRF (X-ray fluorescence) devices to analyze red metals and one on collecting a representative sample on copper and copper alloy-based scrap.

Estelle said these documents are intended to be guides. “They're not intended to be prescriptive and say, ‘We should do it this way or we should do it that way.’ It's just trying to get all these acceptable methods in the same place, so, when there are disputes, it will be easier for a buyer or seller to say this is the way that we did it and be able to point back to some standard language.”

ISRI2024 was April 15-18 in Las Vegas at the Mandalay Bay Resort & Casino.