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  1. #1

    U.S. scrap copper trade fears defaults from China !!!

    At least one U.S. scrap copper trader has suffered "large" losses after a buyer in China defaulted on a deal in the past week, one of the first signs that sinking prices and tightening credit are taking a toll on the physical market.

    The customer walked away from a deal that had been guaranteed by a letter of credit, said a market participant who was familiar with the matter, but withheld the identity of the companies involved to protect business relationships. China is the world's biggest copper consumer.

    Other traders in the U.S. scrap market said they had heard of similar defaults starting to crop up as a rout in copper prices prompts Chinese buyers to shred contracts with U.S. suppliers, reviving memories of the wave of defaults that shattered trust in the market after the 2008 financial crisis.

    The feverish speculation comes as China's first domestic bond default has triggered one of copper's steepest drops in years. Prices have tumbled 9 percent in the past week, with the most-active May contract on COMEX sinking to $2.942 per lb on Tuesday, its lowest in almost four years.

    Scrap deals are more prone to so-called wash-outs than refined metal and concentrates trade typically handled by larger firms, limiting the potential damage for now.

    But if confirmed, it would be the first concrete sign that tightening credit and fears about demand may have forced fabricators, which use lower-priced scrap as an alternative to cathode to make wiring and plumbing products, to reassess their raw material needs.

    "Copper was Bitcoin for China. The game's over. There's a huge excess of copper that's just not needed," Herbert Black, owner of Canadian scrap metal merchant American Iron & Metal, said.

    On Tuesday, a senior executive at Jiangxi Copper Corp said customers have not cancelled any term shipments. [ID:nL3N0M81IY]

    The fears are particularly acute for exporters in the United States, which is by far China's biggest scrap supplier, accounting for a fifth of the country's 4.4 million tonnes of copper scrap imports last year. U.S. imports were double that of Hong Kong, which was ranked second. [ID:nEAP001307]

    As much as 15,000 tonnes of No. 2 copper scrap, a relatively high grade of scrap with about 95 percent copper content, could be stranded in China as a result of the default, the first market participant said.

  2. #2
    Legendry Member Michael Hodges's Avatar
    This is very interesting. On the one hand copper prices may fall sharply, or there could be a greater drop in precious metals for manufacture etc...what it also means is that materials for manufacture in China will be cheaper and in the longer term that is good for economic recovery, but of course there are a lot of factors at play in China, still a spot of worry no matter how you look at it.

  3. #3
    Veteran Member hchandra's Avatar
    This means more weakness in the commodity prices, is it long term?
    or maybe this is some kind of way for fat hand to scare small fish into selling their assets and collect everything before bringing everything to the sky?
    More and more negative news, but I think nothing serious yet.

  4. #4
    Legendry Member Michael Hodges's Avatar
    IT's the scrap trade too, not high quality copper just stuff for housing wires and general production. They still need the good stuff for technology and other high end uses.

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