Sitting it out.

Copper has been on quite a run throughout the past 18 months. Prices have soared far past any traditional metrics, and the frenzy over copper scrap availability has helped fuel much of the theft that has swept the country.

However, recent trends point to a fairly significant slowdown in the copper market. No one is saying it is a major correction from the fantastic run that has taken place. However, several handlers of the material say that more buyers, who had helped to drive the market earlier this year, are now sitting on the sidelines, even as copper prices slip.

A host of possible factors could be responsible for the decline in copper markets. One possible reason for the decline, according to several contacts, is the possibility of an end to a strike at a large copper mine in Chile. Another processor says that buyers are just not buying right now and are willing to sit on the sidelines, avoiding large buys.

As a result, inventory levels are growing, with several copper dealers saying they are having a more difficult time selling their processed copper scrap.

One scrap processor says that it is difficult to find any buyers for the material presently. He adds that spreads are widening, exacerbating the situation.

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Some vendors have noted that the summer is typically a season when markets slow down. However, there doesn't appear to be any signs that buyers are waiting until the end of the summer to start building up stocks. Even the Chinese market, which has been the key driver for copper, has been quiet, though several domestic buyers say that some buyers in China are showing modest interest.

Climbing inventories and softening orders could indicate a slowing economy, some vendors say. One Midwestern buyer says that tubing mills are not selling finished product, a further indication that the economy is softening.

While prices have been slipping, price levels still are far higher than traditional copper price indices, so some contacts say they feel copper prices could drop even further if orders remain muted during the next several months.

However, some market observers say that despite a sharp decline in copper scrap prices, they are still far greater than $3.25 per pound. In fact, according to the most recent figures from Kitco, while prices are down to around $3.40 per pound from a high of more than $3.70 earlier this summer, they are still higher than the $3.10-to-$3.20-per-pound range of early this summer.

More people say that the surging buying from Chinese consumers could cool as the Chinese economy may see a small "hiccup," causing temporary softening of the grade.

While copper, and aluminum, are showing signs of being overextended, nickel markets continue to show great strength. Reflecting the surge (and decline in stockpiles), the London Metal Exchange (LME) imposed restrictions on trading in light of severe shortages. According to the New York Times, since the beginning of this year, nickel inventories reported by the LME have declined by 83 percent, while prices have increased more than 100 percent.