Germany-based scrap consumer and copper producer Aurubis says August 2017 represented a strong pricing month for copper, with market fundamentals, a weak United States dollar and speculation all playing a role in the red metal’s price gains.
In its most recent “Copper Mail” write-up, Aurubis says the value of copper reached a “multiyear high” in August 2017 and adds, “Since nothing sensational occurred on the copper market in the past four weeks, investors’ new-found interest can likely be attributed to expectations.”
In terms of market fundamentals, the copper producer says speculators are foreseeing “good demand [in the face of] inadequate production.” Aurubis also points to the weak U.S. dollar as paying a role, “by making the entry into dollar-based commodity investments more attractive.”
As copper’s price surge in August, so did the amount of recycling-related regulatory activity in China. Aurubis comments that China’s government is indicating “there are supposed to be three regulation lists – ‘forbidden,’ ‘limited’ and ‘permissible’ – for [scrap grades] that are affected by possible import bans or restrictions.” These lists will be applied to grades “for which additional treatment or disassembly before processing in a smelting furnace is required, or for which the copper content is relatively low.”
Aurubis continues, “In the copper sector, materials with customs tariff codes (HS Code) in Group 7, such as cable, wire scrap and motors, are expected to be on the ‘limited’ list.” Grades such as No. 1 and No. 2 copper, which is listed in HS category 6, are not expected to be covered by the new regulations.
China imported around 1.85 million tons of copper scrap in the first half of 2017, says Aurubis, which cites Metal Bulletin as reporting the majority of this material belonged to Category 7, based on weight. “Possible consequences [of the new] import restrictions [could include] pretreatment in countries such as Thailand, Malaysia or Vietnam,” says the Aurubis report. The company adds that “much is still unsure and needs factual clarification.”
On the supply side in August, Germany-based Aurubis says the European copper scrap market provided a steady flow of materials, “to which the high copper price contributed significantly.”
Looking at the pricing situation, the “Copper Mail” authors write, “The LME (London Metal Exchange) copper price development in August was surprising. In a time that is normally characterized by low market activity on the metal markets, copper was able to post significant gains [and] a level last seen in September 2014 was reached. On Aug. 29, the official LME Settlement Price was at $6,797 per metric ton ($3.08 per pound), around $500 per metric ton (23 cents per pound) above the first August price.”