Washington (Platts)--21Feb2013/655 pm EST/2355 GMT

Spreads for copper scrap sold in the US remained largely unchanged this week, with most market participants waiting to see if the recent decline in copper futures would hold.

The Platts spread for No. 2 birch/cliff scrap narrowed to May COMEX minus 35 cents, delivered FAS, from May COMEX minus 36 cents last week. Even so, spreads remained in the mid-30s range.

"The Chinese are running a little behind because they were expecting things to pop over there," one scrap trader/recycler in the upper Midwest said, adding that he was offered No. 2 at May COMEX minus 35 cents, delivered.

"But when I look at the Chinese market, it hasn't changed a whole lot. COMEX has gone down but the Chinese are still at Yuan 58,000 on the Shanghai [Futures Exchange]," the broker added. "It was lower than that before the Chinese New Year started, but only by about 4-5 cents."

Moreover, the few Chinese buyers in the market were not asking for substantial volumes, the trader/recycler added.

The lack of buying and the recent drop in copper futures may indicate Chinese mills are preparing to renege on their orders, as they did in the fall of 2008 and again in the summer of 2011, one scrap trader in the Midwest said.

"For the birch/cliff, I don't think there's been enough time for [Chinese buyers] to react in any way, so we haven't heard of tighter spreads," he said. "But I think they're busy planning to default on everything they've bought at higher prices."

The trader said he felt a number of US brokers and traders had grown overly comfortable with Chinese buying since the summer of 2011, and have made trades with terms that were "risky," i.e, trades made without an upfront payment requirement.

"If this thing turns into a route, you're going to start hearing about massive defaults out of China," he said.

Spreads for mixed loads of No.1 burnt wire/pipe and tubing and bare bright -- the grades normally sold to US mills -- remained unchanged at May COMEX minus 17 cents delivered, and May COMEX minus 8 cents delivered, respectively.

Mixed-load sales of No. 1 were heard between May COMEX minus 15-20 cents, delivered, while sales of bare bright were heard at May COMEX minus 6-8 cents.

One trader in the South sold several loads of bare bright at 6.5 cents, but acknowledged spreads could be wider depending on delivery location.

Sources characterized US mill interest for bare bright as steady, though not aggressive. Spreads may narrow with the recent decline in copper futures, but not significantly given the lower cathode premiums, the Midwest trader said.

Some US wire mills use bare bright as a substitute for, or complement to, exchange-traded cathode due to its high purity.

--Nick Jonson, nick_jonson@platts.com --Edited by Richard Rubin, richard_rubin@platts.com