Spreads on copper scrap prices have widened in recent weeks as seasonal factors kept business light, while a government crackdown at Chinese ports continued to hold shipments back and depress prices, industry sources said this week. "The pipeline is full at their end, it's full at out our end, and it's empty in between," said one Midwest dealer.
Indeed, copper scrap shipments arriving at Chinese ports have crawled to a snail's pace over the past month as tax officials began inspecting cargoes believed to be misrepresented with fraudulent documents.
"There's pent-up demand in China because of the slowdown in intake. There are a lot of excess containers, but once they go through that, they don't really have much on hand or anything coming through the pipeline," said one scrap dealer, adding that US domestic markets remained full of excess supply due to the slowdown in China. Chinese imports of scrap totalled 2.6 million tonnes during the first half of the year.
No 1 Bare Bright copper scrap spreads were now being quoted 8 to 12 cents under COMEX December copper, from around 10 cents below a week No 1 Burnt was seen at 30 to 40 cents under versus 35 cents a week earlier, while No 2 widened out to 70 cents under from 60 to 65 cents previously. Still, the deepening discount of copper scrap to the benchmark futures price should attract end-users looking for a bargain, dealers said.
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