Chicago 11/05/2016 - The United States copper market is a bright spot in a dreary global marketplace amid robust rod demand, exceptionally tight secondary supply and a sudden lack of available off-grade material.
The Midwest delivered copper premiums this week climbed to 6.0-6.5 cents per pound, up from 5.75-6.25, according to FastMarkets' data.
"It's a pretty bleak scenario outside of the US but we're holding our ground here," a US-based physical trader said.
Because of strong rod production, available cheap scrap has evaporated and manufactures have resorted lower grade primary material to fill their orders - particularly the brass mils.
While one trader said this tightness might only last for four or five weeks, the sudden increase has caught market participants off-guard.
During the American Copper Council spring meeting in Tucson, Arizona, last week, prices were so attractive that one trader said he sold everything that he had, while another noted that "everybody was open for some tonnage".
The collapse of copper prices over the last year has forced more market participants into the spot market as long-term financing deals have evaporated. More spot activity has led to increased competition for a dwindling level of scrap, driving action and pushing prices higher.
"Scrap isn't there. We have multiple people bidding on the same destinations and the same lots," a trader said.
Moving forward over the medium and long-term, China remains the primary focus for investors. Recent Chinese copper import data shows unwrought copper and copper products totalled 450,000 tonnes in April, down 21.8 percent from March. However, imports of 1.88 million tonnes in January-April were up 23.1 percent year-on-year.
"China is probably not gonna get much better," a physical trader noted at ACC.
Nevertheless, US cathode demand expected to improve, which should keep premiums well supported going forward.
"Six cents is sustainable - a lot of the traders are short," the trader added.
(Editing by Tom Jennemann)