Copper Market Plunge to Reduce Scrap Supply in Tokyo

Copper scrap transaction is expected to get slow around Tokyo when Japanese official copper ingot price decreased by 80,000 yen per tonne or largest drop since October 2008. The scrap providers are reluctant to get new order under plunged market while the scrap buyers cannot purchase at high price when they try to reduce the inventory valuation loss. The lower price could result in lower scrap supply.

The price down was much wider than expected. The plunge cooled the scrap providers’ sentiment. The scrap providers show no sign to liquidate the high priced inventory and could hold the inventory until the market recovers. The lower supply could support the market.

The intermediate scrap traders with high priced inventory try to reduce the averaged inventory price to minimize the transaction and inventory valuation loss. Many of the traders try to buy the scrap at market price level when they reduce the supply commitment to makers in April-June while some of the traders offered high price to secure inventory with expectation for higher price.

Japanese scrap industry now expects copper ingot market could keep decreasing for a while when European sovereign crisis pressures on stock market. The scrap transaction could keep inactive when both sellers and buyers try to find the sign the market hits bottom. The scrap users of rolled copper makers would increase the consumption of electrolytic copper under limited availability of the scrap.