Why copper scrap is behaving in a way that wasn't supposed to be possible
u/IndustriousMadman ·
Reddit — r/wallstreetbets
· May 29, 2026 at 15:36
· ⬆ 99 pts
· 💬 44 comments
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Summary
The post analyzes a breakdown in the traditional copper scrap payability rule, where scrap premiums remained sticky despite a copper price surge, indicating structural supply tightness.
The author attributes this to strong Chinese scrap demand (due to policy changes) and constrained global scrap supply, arguing that the scrap market confirms the same shortages seen in primary copper.
Quality assessment: This is well-researched DD, grounded in market mechanics and specific data (payability coefficients for Millberry and No. 2 copper), with clear reasoning linking scrap dynamics to broader copper supply chains.
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There's an old rule in copper markets. When prices surge, scrap payability coefficients drop. More metal chasing the same material, buyers get picky, premiums compress. Simple supply and demand logic that held up for years. May just broke that rule pretty cleanly.
Copper prices surged then pulled back, but scrap payability coefficients barely moved. Millberry - the cleanest grade of copper scrap - held at 98.5%. No. 2 copper, which is lower grade and usually more volatile, actually climbed from around 95% to 96-97%. That move was partly driven by gold and silver byproducts making the material more valuable than the copper price alone suggests.
The reason the old logic stopped working is pretty straightforward once you see it. China tightened domestic policies and tax compliance, which kept demand for imported scrap unusually robust. At the same time overseas scrap supply stayed tight. You've got strong demand on one side and constrained supply on the other, and that combination made payability coefficients sticky in a way the market wasn't really priced for.
What this tells you about the broader copper picture is that the supply stress isn't just showing up in mine output or project pipelines. It's showing up in the recycled metal market too. Scrap is supposed to be the flexible relief valve when primary copper gets expensive. Right now that valve isn't releasing much pressure.
For anyone watching the copper supply chain - whether that's producers like FCX and TECK, developers or early stage explorers like NRED and KDK working on future primary supply - the scrap market quietly confirming the same structural tightness as everything else is worth paying attention to.