Copper Scrap Market: How Secondary Supply Impacts HG Futures
The copper scrap market is the quiet stabilizer of the entire copper ecosystem. When refined supply tightens, scrap fills the gap. When refined supply loosens, scrap demand collapses. HG futures don’t always react to scrap flows immediately, but scrap availability determines how deep or shallow real copper tightness becomes. If you ignore scrap, you're missing the pressure valve that decides whether copper squeezes or cools off.
Why Scrap Matters More Than Traders Realize
About a third of global copper supply comes from recycled metal. This secondary supply reacts far faster than mining or smelting. Mines take years to adjust, smelters take months, but scrap yards respond in weeks.
Scrap behaves like:
- a buffer during refined copper shortages
- a brake during copper rallies if supply is abundant
- a volatility amplifier when flows tighten unexpectedly
This dynamic is why supply shocks (covered in the supply-shock article) hit harder when scrap availability collapses simultaneously.
How Scrap Supply Expands During Rising Copper Prices
When HG rallies, scrap sellers get active. Homeowners unload wiring, demolition crews process old building materials, manufacturers offload leftover copper. Scrap yards increase intake fast.
Scrap expands when:
- high prices incentivize collection
- refiners offer strong premiums
- yards liquidate inventory into rallies
This added supply dampens extreme copper rallies — unless refined supply is already tight.
How Scrap Supply Collapses During Weak Copper Prices
When copper prices fall, scrap dries up instantly. Collectors stop bringing in material. Demolition and construction slow. Scrap yards refuse to sell inventory at a discount.
Low scrap availability creates:
- pressure on refiners to bid up prices
- earlier trend reversals in HG
- faster inventory drawdowns
This is one reason copper often finds support earlier than traders expect — scrap stops absorbing demand.
Scrap Tightness: The Hidden Fuel Behind Explosive HG Moves
The biggest copper squeezes happen when refined supply is tight and scrap availability collapses at the same time. Copper’s entire supply system loses its flexibility.
What traders see on the tape:
- breakouts that don’t retest
- pullbacks that barely develop
- violent continuation legs
- ATR expansion similar to what’s covered in HG’s volatility profile
Scrap tightness doesn't make the news, but the price action exposes it instantly.
How Scrap Interacts With Inventories
Scrap flows directly influence LME and COMEX inventory behavior. Refineries lean harder on fresh scrap when warehouses thin out. When scrap dries up, inventory drawdowns accelerate.
Scrap → inventory clues:
- high scrap availability slows inventory draws
- low scrap availability accelerates them
- sudden scrap shortages produce inventory shocks
This makes scrap a critical part of reading the inventory reactions described in the inventory fundamentals guide.
Scrap Quality: The Element Traders Rarely Consider
Not all scrap is equal. High-grade scrap (bare bright wire, clean busbar, tube) moves quickly through the system. Low-grade scrap requires more processing, and during tight markets, refiners avoid it because time matters more than cost.
When high-quality scrap is scarce:
- refiners bid harder for clean material
- physical premiums rise
- HG futures get more sensitive to fundamental shifts
When low-grade scrap dominates the flow, the system slows and copper trends are easier to fade.
Final Takeaways
The copper scrap market isn’t a side character — it’s the pressure valve that decides whether HG rallies exhaust early or turn into real squeezes. Scrap expands when prices rise, collapses when prices fall, and tightens explosive moves when refined copper is already scarce. If you track scrap availability alongside inventories and supply disruptions, you’ll understand copper’s trend structure long before the chart spells it out.