Record Copper Scrap Supply Unlikely to Meet Robust Demand

SEATTLE (Scrap Monster): Citi, in its latest research report, says that decade high prices are likely to lead to increased copper scrap supplies in 2021. However, these are unlikely to balance the robust demand. Also, the anticipated supply-demand gap will trigger further price gains.

The prices of the red metal had recently hit the highest level since August 2011. Over the previous one-year period, it has surged almost two-folds. Incidentally, scrap accounts for around one-third of world’s total copper supplies. The shortage of copper scrap that reach the market for processing coupled with ongoing logistical constraints are unlikely to boost scrap supplies in the near-future, said Max Layton, analyst at Citi.

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The limited new scrap supply will lead to inventory draws over the next six months. The stock draws are likely to happen mostly from LME-registered warehouses and those under the custody of SHFE. The inventory levels are likely to witness sharp declines during the month of May, ahead of pick up in construction activities. The market requirement for copper scrap in 2021 is projected at around 10.8 million tonnes, compared with 9.3 million tonnes in 2019.

The mine supply too is expected to surge this year, but this too will not be sufficient to balance the deficit.