Copper scrap market conditions, which had been in an adjustment phase due to a sense of caution about high prices, have begun once again to test higher levels. As of the 4th, the main scrap grade No.1 bare bright copper wire recorded a first-ever major milestone at 2,015 yen per kilogram, standing 135 yen higher compared with the recent low in mid-February. Trading itself is still rather sluggish overall, but procurement for long-term contracts for April–June has begun moving in some areas, which has created a change in the market tide. However, as near-term focal points, new factors have also emerged, including export trends to China after the Lunar New Year holidays and the intensification of tensions in the Middle East. Reflecting this, the LME benchmark price on the 3rd (spot) fell sharply to $12,820 per ton, down $410 from the previous day. This revealed a risk-off trend, and the domestic copper benchmark price on the 4th fell by 40 yen per kilogram from the previous day, increasing the possibility of short-term downward pressure.
LME copper and domestic benchmark price trends over the past three months
As of the 4th, looking at the main price movements in the copper scrap market, No.1 bare bright copper wire, mixed nugget scrap, and mixed copper are priced at 2,015 yen/kg, 1,990 yen/kg, and 1,920 yen/kg respectively, all 135 yen higher compared with mid-February. After peaking out in early February, the market remained in an adjustment phase until mid-February, but after confirming the bottom price, the pace of increase accelerated. That has been the trend up until the 3rd.
20-year price trend of No.1 bare bright copper wire.
20-year price trend of mixed nugget copper scrap
20-year price trend of mixed copper (for smelting, Cu 95%)
“There has been no major change in the purchasing appetite of demand-side players such as smelters and copper product manufacturers, and the market’s supply–demand balance continues to remain stable at a low level. However, wholesalers who quickly cleared inventories that had been bought at high prices have begun moving to secure volumes for April–June long-term contracts.” “They have also become accustomed to the high price levels on the LME, caution has eased, and market-order buying while consulting their existing inventories has also begun to appear.” Taking together the remarks of market participants, it can be said that such movements at the distribution stage have pushed up the current market purchase prices.
For the time being, the focus is the rebound effect from the escalating situation in the Middle East. “Structurally, a certain amount of cargo from the Middle East flows into Japan,” so in addition to direct impacts on supply and demand, the indirect effects through the LME market reflecting rising energy costs cannot be ignored. However, if speculative funds that had been pushing LME prices to extremely high levels become more conscious of geopolitical risks and seriously shift to a risk-off stance, exiting the market, the underlying premise would collapse.
There is also the matter of purchasing trends among Chinese buyers after the Lunar New Year holidays. Some say that “activity has begun,” but due to the economic slowdown, many uncertainties remain about how much momentum it will actually show. Together with the Middle East situation, it will be necessary to closely monitor how overseas factors will influence the market while raising the level of caution.
As of the 3rd, LME inventories increased by 83,000 tons compared with the beginning of the month, reaching 257,675 tons, and since mid-January the upward trend in inventories has become increasingly clear.
(IRuniverse G・Mochizuki and Translated by Rohini)
