The supply of scrap copper is expected to surge this year as copper prices hit a near 10-year high, but still not enough to meet strong demand, foreign media reported.
The supply shortfall will lead to lower inventories, boosting copper prices further.
On Friday, copper in London closed at about $9,551 a tonne, close to its highest for the year at $9,617 -- also its highest since August 2011 and more than triple its price since March last year.
Scrap typically accounts for about a third of the world's copper supply, but the amount often varies depending on the price.
Max Leighton, an analyst at Citi, said supply was unlikely to increase as quickly as the market needed, given tight logistics, stronger prices and an eight-month lag for scrap entering the market.
The market will need about 10.8 million tonnes of scrap copper this year, compared with 9.3 million tonnes in 2019.
Refined copper stocks are expected to fall over the next six months.
Citi expects global copper demand to grow 6.5 per cent this year to 24.75m tonnes, with a shortfall of 521,000 tonnes.
While producers and consumers, among others, hold substantial copper inventories, they are difficult to monitor.
The market therefore focuses on warehouse receipts from the London Metal Exchange and Shanghai Futures Exchange, registered warehouses that currently hold a total of about 360,000 tonnes.
Analysts expect copper inventories to start falling as early as May, when demand will pick up speed.
Moreover, copper prices are likely to rise further as construction activity picks up over the summer.
Mine copper supply is also expected to increase this year, but growth is not fast enough to make up for the shortfall.
Michael Widmer, analyst at Bank of America, said the increased supply of either mine or scrap would not be enough to push the refined copper market into oversupply.
Supply of scrap copper is set to hit a record high this year as prices remain high and manufacturing activity accelerates, with the copper market expected to be short by 315,000 tonnes.
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