Europe is currently in the middle of its summer vacation period and the usual slowdown in business activity. Lower LME levels and the incredibly hot weather have also led to reduced street collections. Demand is not expected to pick up until September, while many plants are implementing planned shutdowns. Despite a weaker Polish zloty (trading at 4.6-4.8 to the US dollar in July versus 4.4 in June), exports are slow.
In Ukraine, the market is continuing to function. Street collections of brass are reported to be approximately 20% of pre-conflict volumes but are sufficient to enable exports to keep going. Domestic copper collections are enough to cover internal demand whereas exports and imports are non-existent owing to slower demand and the gap between the official and cash currency rates (29 versus 38 UAH to the US dollar at the time of writing).
The Russian metal market is being heavily disrupted by currency and LME fluctuations. Even with currency hedging, the gap between the official and cash US dollar/ruble rate is 10-15%. Cable producers are taking advantage of the lower LME levels by trying to buy copper for their previously-signed contracts at lower prices, showing increased demand in July. At the same time, scrap suppliers are carrying plenty of stock purchased at higher LME levels and currency rates, which they are not ready to move at current market prices owing to the absence of relevant hedging. The same gap can be seen in the aluminium market.
Key recent developments in actions taken against Russia include proposed sanctions against copper giant UMMC and the tightening of sanctions on Russia’s top lender Sberbank, both of which have the potential to be very significant.