Correcting course

Features - Copper Commodity Focus

Copper saw a price correction in mid-June, but some traders say they don’t think that signals an end to rising prices.

June 28, 2021

© ???? ?????? /

Despite its mid-June decline in pricing, many scrap traders and commodity analysts still believe copper has a rosy future that will be fueled in part by the transition to the green economy.

Taking a tumble

Copper prices hit a 10-week low as of June 21, with three-month copper on the London Metal Exchange (LME) falling 1.4 percent to reach $9,021 per metric ton, a low last seen April 14, Reuters reports. This decline was preceded the previous week by a fall of 8.6 percent, marking the greatest weekly contraction since March 2020.

Just one month earlier, David Neuhauser, founder and managing director of U.S. hedge fund Livermore Partners, Northbrook, Illinois, told CNBC that copper is “the new oil,” referring to the red metal’s role in electric vehicle batteries and semiconductor wiring.

“I think copper is the new oil, and I think copper, for the next five to 10 years, is going to look tremendous with the potential for $20,000 per metric ton,” he told CNBC.

That sentiment was echoed by an analysis released in early May by Bank of America, which said global supply shortages could push the metal to $20,000 per metric ton by 2025.

The Bank of America analysis by commodity strategist Michael Widmer also notes that copper inventories were at lows last seen 15 years ago.

But how quickly things can change.

In mid-June, the People’s Republic of China’s National Food and Strategic Reserves Administration announced plans to release industrial metals from its national reserves in an effort to rein in commodity prices, Reuters reports. The announcement sent copper prices downward.

Furthering the mid-June decline was news that the U.S. Federal Reserve anticipated raising interest rates earlier than it previously expected, which sent the U.S. dollar higher and damped demand for metals, Reuters reports.

In the June 18 edition of “The Copper Journal,” John Gross, president of John E. Gross Consulting Inc., Huntington, New York, speculating about the decline in pricing, writes, “Was it the value of the dollar rising that caused the sell-off? Or was it because of China’s announcement that they were going to release metal from their stockpiles to put a lid on prices? How about markets had just gotten too far ahead of themselves that caused a correction?

“We suspect it was all of the above, and then some, to include the Fed changing its outlook, ever so slightly that they may have to raise rates in 2023, sooner than expected, as inflation and the economy heat up. And if that weren’t enough, as markets began to falter, the Specs came in to turn the retreat into a rout,” he writes, referring to market speculators.

Gross notes that his firm’s “long-term Copper Study Charts are now flashing yellow caution lights as short-term guidelines have been violated.”

As of June 18, the average spot copper price was $4.47 per pound, 17 cents less than May, when it was $4.64, Gross says. He writes that this is the “first month-over-month decline since the runup started in March 2020.”

But things can change quickly.

June 22, when the Chinese government announced that 20,000 metric tons would be released from its copper reserve, the value of copper rebounded on terminal markets immediately.

Still, some analysts believe the fundamentals don’t support copper pricing. Julian Kettle, senior vice president and vice chair of metals and mining at U.K.-based Wood Mackenzie, in a commentary posted June 1 to that consultancy’s website, writes that, throughout 2021, he has been “quite vociferous in my view that prices for copper (along with several other mined commodities) do not reflect fundamentals.”

He says demand likely will wane as economic activity slows in 2022 following the postpandemic recovery. “Interest rates will rise to stave off inflation. Taxes will have to be raised to start to pay down the extraordinary debts built up by governments during the pandemic, and quantitative easing will start to be unraveled, albeit slowly.”

Kettle writes, “I am still of the view that prices have moved too far, too fast and that heady forecasts of prices doubling or even tripling from current levels in the medium term are ‘punchy.’”

Some scrap traders, however, say high prices for red metal scrap are supported.

In support of high prices

While he says he is not in the business of forecasting metals prices, Bernard Schilberg of Prime Materials Recovery Inc., East Hartford, Connecticut, adds that he is bullish about copper.

However, the CEO says, “A correction was due,” and “technical issues” led to the sell-off in the market in June.

Joey Harrell, who handles nonferrous marketing for M. Lipsitz and Co. Ltd., Waco, Texas, says China’s dumping of copper from its warehouses onto the market has a “psychological effect” on the market, adding that he is curious to see how long it will take for that material to be absorbed. However, he says he believes it’s only a matter of months before copper pushes toward the $5 mark.

Scott Greenberg, a Florida-based trader with the Georgia-based brokerage firm Greenland (America) Inc., also describes himself as bullish regarding the outlook for copper. However, he adds, “The market went up awfully fast, and it went up awfully high. And if it goes up that high, that quickly, you’re bound to see a correction.

“Generally, I think the electric cars are not going away, and the infrastructure has to be built,” Greenberg continues. “These things are looming in the background. They are going to be making more electric cars, and they are going to need to build charging stations everywhere,” he says.

More electric cars mean more copper. Wood Mackenzie estimates by 2030, more than 20 million EV charging points will be distributed globally, consuming 250 percent more copper than in 2019. The vehicles themselves can use up to three and a half times more copper than a passenger car with an internal combustion engine, according to the research and consultancy group.

While that potential has yet to be realized, red metal scrap continues to flow, with sources indicating healthy domestic and export demand.

Still moving, when logistics allow

Harrell says red metal scrap has been flowing well, with retail sales being particularly strong. “We’re seeing quite a bit from peddlers. They are still excited about the prices. Anything over $3 is still good incentive to bring material in.”

He adds that spreads between scrap prices and the price of copper on the terminal market exchanges remain tight.

The red metals consumers that M. Lipsitz sells to are “pretty full right now,” Harrell says, noting that they are cutting back a bit on buying until they get their inventories down. However, his company still is shipping material consistently, with Harrell saying, “They don’t want us going to look for another home.”

Greenberg says delivery windows generally range from 30 to 60 days at domestic mills. “I think a lot of these guys have tried to stretch out their delivery appointments to build some kind of inventory from a supply standpoint,” he says. “But, in the same token, they also have to be careful to make sure it’s hedged and not to overdo their inventory.”

Schilberg says the copper market is supply-driven, with major shortages of secondary copper, anode and cathode as of mid-June.

“It is relatively strong,” he says of domestic scrap demand for high-grade material. “Refinery and smelter grades are not as strong.”

Schilberg says some consumers are building up their scrap inventories because of supply chain issues and trucking difficulties. “Trucking is one of our major challenges,” he says, citing reduced availability and increased pricing. “We are not seeing any easing” when it comes to the challenges with trucking.

Greenberg, who also describes scrap demand as strong, says, “Logistics are still running the show.”

He says trucking rates on some domestic lanes have doubled or tripled, which can make export bookings more attractive in some cases.

Buyers for Chinese consumers also are offering 10 cents per pound more on average for high-grade copper scrap than other buyers, Greenberg says. “China’s the highest price by far, but there’s a risk,” he says, meaning that the material might not be cleared for import if it’s not perceived to be high quality enough.

“Sometimes the best deal I do is the one I don’t do,” Greenberg says, adding that unless he and the supplier have high confidence the scrap will meet China’s strict quality requirements for imports, he’s not likely to do the transaction. “I think it’s better to stop the problem before it starts by really identifying if it’s safe to go to China or not.”

China’s pricing has caused some U.S. buyers to tighten their spreads to keep material flowing in, Greenberg says.

Though the copper markets generally cool off as the mercury rises in the summer, he says that might not be the case this year. “All the rules we grew up with, they’re all basically out the window … It’s not solely based on fundamentals.”

Greenberg adds, “We’ve all been making a profit as the market goes up. Well, now, it’s gone down a little bit. You should still move the metal. And if you move it load by load as the market drops, you might lose a little bit here or there, but you won’t lose big. You won’t win big, but I think you’ll be safe.”

The author is editor of Recycling Today and can be contacted at