Photographer: Kevin Lee/Bloomberg

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The supply tightness that has helped fuel copper’s epic rally is showing signs of spilling over to the Chinese scrap market, with traders hoarding the metal on bets on further price gains.

Refined-copper’s premium over scrap slid to 3,934 yuan ($610) a metric ton on Thursday, a 10% drop from Monday, when it hit the highest in eight years, according to data from Mysteel Global. The spread has narrowed as prices of the waste metal climbed after some traders hoarded supplies in anticipation of even more gains, said Li Dan, an analyst with the Shanghai-based researcher.

Tightening

Copper premium slides from 8-year high amid waste hoarding

Copper scrap has spiked along with benchmark prices in London, which are heading for an unprecedented 11th monthly advance on expectations government stimulus that focuses on green initiatives will fuel demand and spur a shortage. Despite the recent decline, the premium people are willing to pay to secure refined metal remains elevated and signals the increasing appeal of scrap.

Some traders have refused to sell copper scrap, which has left the market “a bit short,” Li said by phone, “It will be hard to say whether scrap can replace more refined copper demand for the moment.”

— With assistance by Charlie Zhu, and Winnie Zhu