The rare scene has appeared again: the price of copper is lower than the price of scrap

On Thursday (August 26), due to the presence of the Inhol Hall global market, copper and other industrial metals fell back in a row, ending the interest in entrepreneurship and rebounding in the commodity futures market. In the above, a reaction appeared after a lapse of time, which is making some copper market leaders smell the potential possibility-refined copper prices and scrap copper prices.

Colin Hamilton, general manager of the Commodity Research Department of the Bank of Montreal, said this week that buyers appear to have re-entered the market after months of correction in copper prices. He pointed out that the spot price of high-grade copper scrap in China was higher than the price of refined copper last weekend. This strongly shows that the supply of scrap copper is rapidly decreasing.

The last time this scene appeared was back in April last year, when global central banks and governments injected trillions of stimulus funds into the economy. The LME copper futures soared after bottoming out in the first quarter of that year, breaking the $10,000 mark in one fell swoop in May of this year, and setting a new historical high of $10,747.

Hamilton pointed out that rising scrap copper prices and insufficient supply have caused some demand to shift to the direct purchase of refined copper, which may push up the latter's prices.

Colin Hamilton believes, "This trend is obviously unusual. Although it does not make much sense at the economic level, it is a sign that the market sell-off may have exceeded the fundamentals itself. We do see some preliminary signs that China Buyers have stopped destocking and are returning to the market."

Although copper prices have fallen in the past few months, LME copper prices have still risen by 126% since the low point of the epidemic last year, and the overall upward trend has not completely changed.

Copper prices are firm in the outlook.

Copper is used in power and construction fields. Many analysts expect that as fossil fuels are replaced by electrification, demand for copper will be very strong. In fact, in addition to the above-mentioned rare inversion between scrap copper and refined copper prices, in some other areas, there is no lack of signs of optimism about the outlook for copper prices.

China’s Yangshan copper import premium has recently risen from US$21 per ton in June to more than US$100, which shows that the Chinese market has stronger demand for overseas metals. China has always been the world’s largest copper buyer in the physical market.

In addition, the copper stocks in London Metal Exchange registered warehouses have dropped to 178,125 tons from nearly 240,000 tons a week ago. The LME spot copper price difference relative to the three-month contract has risen from a discount of approximately $30 in mid-August to a premium, which indicates that the supply of metals that can be delivered quickly is tightening.

"I don't see the real reason to be short... there is room for record-breaking," Gianclaudio Torlizzi of consulting firm T-Commodity said on Wednesday. He also pointed out that high inflation expectations, declining inventories, rising Chinese import premiums, and positive demand prospects are all supporting prices.

On the technical level, Torlizzi predicts that as long as the copper price can stay above the 200-day moving average cut-in level of $8,880, the technical side will be improved. The latest trading of LME copper futures on Friday was at 9297 US dollars.

Goldman Sachs analyst Christian Mueller-Glissmann also pointed out recently, "Copper prices may rise before the end of this year. Our strategists believe that the gap between supply and demand can help copper prices break the range in the fourth quarter."