Dr. Copper Takes a Sick Day as China Concern Adds to Dollar Gain

(Bloomberg) -- Copper had its worst day in more than two years as the prospect of slower Chinese demand, dollar gains and an uptick in stockpiles conspired to push the metal back down through the $3-a-pound threshold.

China's construction of roads, bridges and subways is set for a major slowdown, adding a headwind to economic growth in 2018, according to a Bloomberg survey. Deliverable inventories from warehouses tracked by the London Metal Exchange advanced by the most since September, while stockpiles monitored by Shanghai Futures Exchange rose for a fifth week, the longest streak since February.

Sometimes referred to as the metal with a Ph.D in economics because of its ability to track the economy's health, copper has surged 18 percent this year. The rally was spurred on by optimism that Chinese growth is improving, mine supply will fall and demand for electric vehicles will increase. Copper's rise began to falter last week, with the metal posting its biggest weekly loss since March as the U.S. dollar showed renewed strength and investors questioned whether the gains have been excessive.

“Dr. Copper needs a dose of his own medicine,” Tai Wong, the New York-based head of base and precious metals trading at BMO Capital Markets, said in an email. “A sharp jump in on-warrant material and warehouse stocks added to the day's dark mood.”

Copper futures for delivery in March slumped 4.7 percent to settle at $2.946 a pound at 1:10 p.m. on the Comex in New York, marking the steepest loss for a most-active contract since January 2015. The metal fell even as the S&P 500 index was little changed after rising as much as 0.4 percent.

“Copper seems to be getting hit on account of a sharp rise in LME stocks (in excess of 10,000 tons), suggesting that more increases could be coming along over the next few days,” Edward Meir, an analyst at INTL FCStone in New York, said in a note.

Almost all the main metals traded on the LME, including copper, aluminum and zinc, also declined as the Bloomberg Dollar Spot Index gained for the sixth time in seven days. A stronger U.S. dollar makes raw materials more expensive for holders of other currencies. 

Industrial metal producers also slumped, with Teck Resources Ltd. and First Quantum Minerals Ltd. leading the declines in the Bloomberg Americas Mining Index.

To contact the reporter on this story: Luzi Ann Javier in New York at ljavier@bloomberg.net.

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Steven Frank

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