LONDON (Reuters) – It’s been a bad week for Doctor Copper. London Metal Exchange (LME) copper slumped 3 percent on Wednesday and has slid further to a three-month low of $6,150 per tonne, last trading at $6,180.
True, the move took place in something of a liquidity black hole with China and much of Europe on holiday this week, leaving the market prey to automated funds, which have been momentum-trading a rapidly deteriorating technical picture. But copper’s real problem is growing concern about the state of global manufacturing.
It was no coincidence that Doctor Copper, so called for the metal’s ability to predict the way the broader economy is heading, fell out of bed on the day the U.S. Institute for Supply Management (ISM) released its weaker-than-expected purchasing managers index (PMI).
Nor was it just copper. All the LME base metals have been retreating as differing supply dynamics are overwhelmed by demand uncertainty. Macro clouds are keeping many of the macro funds out of the base metals sector, contributing to the type of liquidity gap that opened up in the middle of this week.
The single most important driver of industrial metal prices is manufacturing demand. Worries about the state of demand in China, the world’s largest metals user, have been weighing on LME metal prices since the third quarter of last year.