The reasons, say two reporters who contributed to the article, are that “China is buying more scrap metal, and anticipated infrastructure spending by the Trump Administration is yet to appear.” COMEX copper inventories had risen to 166,000 tons (183,000 metric tons) as of July 11, 2017, says Reuters, representing “an increase of 88 percent since the end of 2016.”
Traders and analysts quoted in the article say primary copper trading has slowed throughout the year, and express concern that copper’s stable pricing is based on anticipated demand that may not materialize.
One of the sources refers to copper scrap’s “record discounts” in 2017 as the reason copper fabricators and producers in China are favoring scrap over cathode. Much of the now excess cathode is building up in COMEX and London Metal Exchange (LME) inventories, they say.
Statistics gathered and posted by the United States Geological Survey (USGS) confirm the trend. In the first four months of 2017, the U.S. exported 231,500 metric tons of copper-bearing scrap to China, an increase of 19.8 percent from the 193,200 exported in the first four months of 2016.
The biggest gainers have been unalloyed No. 1 and No. 2 copper scrap. Exports of these two grades year-to-date from the U.S. to China have risen by 35.8 and 34.7 percent respectively, according to USGS.
In terms of overall global demand for copper, one bank analyst points to disappointment in America’s economy. “There was this belief that with Trump coming into power, you’d see massive infrastructure deployment, taxes would be cut, the economy would be reinvigorated, and you’d have this very pro-growth policy and with that, the U.S. would be consuming more copper,” remarks the analyst with Barclay’s Capital in New York.
Another factor cited in the COMEX inventory buildup was anticipation that Mexican-made copper may face a tariff, so imports from Mexico into the U.S. increased in early 2017.