Buoyancy in the international copper market despite the crippling impact of the Covid-19 pandemic was cited by experts taking part in a special ISRI conference as a reason to be optimistic about the future of the red metal.
The US-based recycling organisation is holding a series of virtual events in the coming week and more than 150 people took part in the one on copper on 20 May.
As with other commodities, copper scrap markets have experienced significant downturns in both supply and demand this year in response to the COVID-19 crisis and corresponding downturn in global manufacturing
One of the two main presenters, Edward Meir of ED&F Man Capital Markets, stressed the crisis was one of health and that meant an environment of slow growth. But it could have been worse for copper, he said, which was ‘on a bit of a break-out at the moment’ with the current LME three-month rate of currently over US$ 5 300.
Meir said people were still making money (‘Even US$ 4 700 is profitable.’) with copper reaching China through different routes. He forecast global recovery in H2, suggesting ‘people are a little too pessimistic’.
‘I favour an optimistic outlook,’ he said. ‘If a vaccine or intermediary antidote can be found then the confidence people feel will mean spending will return. I think we will see a better tone, assuming we make corresponding progress on the virus.’
He reported a Reuters survey of traders showing expectations of a global copper surplus because of a greater demand drawdown than the fall in supply. The anticipated surplus was between 20 000 tonnes and 570 000 tonnes – the traders’ average was 350 000 tonnes.
The second main speaker, Uwe Schmidt of Montanwerke Brixlegg, said although there was lower demand for copper in the automotive industry and in its supply chain ‘those in infrastructure are doing well so we cannot complain overall in this environment’.
He thought there would be improvements in June and July with mills becoming increasingly hungry for scrap. Schmidt said China was continuing to buy aggressively but new, tougher quality classifications for scrap imports from 1July would be a challenge.
Although there have been competition concerns, particularly from the US, over the Aurubis acquisition of Metallo, Schmidt congratulated the parties for securing EU approval in May. ‘They will develop the market in a sustainable way to the advantage of every scrapyard.’
Earlier in the session, ISRI chief economist Joe Pickard set out the latest available data. Quoting non-ferrous prices up to 20 May, he noted the year-to-date fall in LME three-month prices for copper was 13.6%, which indicated a recent slight improvement. Copper is in the middle of the non-ferrous slump, which ranges from falls of 9.5% for tin to 18.1% for aluminium. Copper scrap prices had declined on the previous month during February (-5.2%), March (-7.8%) and April (-3.1%). There had been a 21.3% decline between April 2019 and April 2020.
The consequence of the pandemic on the US non-ferrous recycling industry, suppliers and related businesses, according to research commissioned by ISRI from John Dunham and Associates, was the loss of 28 762 jobs (9 244 direct).
Pickard illustrated a remarkable change in US copper scrap export markets in the past five years. In 2015, China accounted for 69% of trade with Canada the next biggest at 7%. By Q1 2020 China’s share had slumped to 8% with the single biggest market being Malaysia on 19% – which hadn’t featured in 2020.
Canada is now at 12%. Pickard indicated this was certainly in response to China’s import ban and he wondered how much China would be the main driver for exports as the market recovered.
Although the overall export market had shrunk by more than 15%, he added there was growth in copper scrap exports to, among others, South Korea, India, Taiwan, Germany and Belgium.
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