Discounts for refinery-grade copper granule scrap have widened significantly since the fourth quarter of last year as a global surge in supply continued to outpace demand.
Refinery-grade copper granules, or granules #2 (Cobra), are shredded copper wire and typically contain 93-97pc copper, with other metal impurities such as lead, tin and iron, at between 0.5-1.0pc. Secondary copper refiners mix this grade with birch cliff during the cathode production process.
The cash spread for refinery-grade copper granules #2 (Cobra), which is not currently assessed by Argus, was last reported at 84-85pc of the London Metal Exchange (LME) copper price in January, down from 90pc in October–December last year.
Average outright prices for refinery-grade Cobra were assessed at $5,294.25/t, calculated based on the average three-month official copper contract traded on the LME. This has dropped to $4,721.86/t in January, as a result of the widening discount level and falling LME copper prices. The cash spread for the material fell by an average of 4.5 percentage points, or $572.39/t.
Trades for copper granules #2 with minimum 98.5pc copper content and a lower level of other impurities were last reported at 89-90pc of the LME price. This grade is generally used by semi-fabricators that require low levels of lead, zinc and aluminium content in the scrap.
Granules #1 (Clove), containing a minimum of 99pc unalloyed and uncoated copper, last traded in January at a cash spread of 94-96pc of the LME copper price, down from 96-97pc in December.
Although Clove's prices are more stable, as there is strong demand for the material since it does not need further processing and could be used directly in the furnace, prices still came under pressure amid rising supply.
Limited demand amid growing supply has further pressured prices for refinery-grade cobra. The discounts for refinery-grade cobra also widened further as suppliers were keen to sell large volumes amid growing supply to generate revenue.
"Most of the refiners are reluctant to buy granules so the discount is getting bigger," one semi-fabricator said.
"The refiners need the clean material as a base then they add in granules. The ratio is around 60pc birch cliff, 40pc granules," one supplier said.
Global granules supply began to surge when China imposed a ban on imports of category 7 scrap metals from 31 December 2018 as part of an environmental policy to reduce pollution. The banned category includes copper cable and motors, and the import restriction has halted the flow of cables to the world's largest scrap metal consumer, leading to rising stockpiles in Europe and the US.
"In Europe, the US and Asia, lots of cables are processed into copper chops (granules)," one refiner said.
"The cable shredders are still working through the volume, they sell [granules] forward and they buy the cables, they just pay less for the cables. The majority of the cables are staying in Europe," a second refiner said.
Scrap suppliers are hoping that Chinese demand will return after manufacturing activities in the country return to normal following shutdown restrictions to control the coronavirus outbreak in January. The Chinese government extended the lunar new year holiday by three days to 2 February and some local governments have advised firms to restart work on 10 February. Without Chinese consumption, the discounts for granules are likely to stay wide.
"There is lots of granules in the market, maybe this will change when China will buy again," a Europe-based scrap supplier said.
