The copper market took its biggest beating since January as fresh evidence that supplies are rising led traders to put an end to a four-day rally in the metal.
Stockpiles monitored by the London Metal Exchange have ballooned 90 percent in the past year, and on Wednesday the hoard increased by the most since March, or 3.1 percent. Supplies are rising at a time when slower economic growth is curbing demand from China, the world’s top consumer.
Prices have slumped 12 percent in the past year as global gluts in everything from cotton to sugar have kept many commodities trapped in bear markets. Goldman Sachs Group Inc. has said that its outlook for copper is among the most bearish for raw materials because the metal will fall as the dollar strengthens and demand from China’s construction industry wanes.
“The supply and demand fundamentals aren’t supportive,” Tim Evans, the chief market strategist at Long Leaf Trading Group Inc. in Chicago, said in a telephone interview. “You can look at the macroeconomic perspective of growth in China, or the supplies, and either way, you’re coming to a negative conclusion.”
Copper futures for July delivery slumped 2.8 percent to settle at $2.669 a pound Wednesday on the Comex in New York, the biggest drop for a most-active contract since Jan. 27. The metal touched $2.6575, the lowest since March 20.
Stockpiles tracked by the LME are headed for the first weekly gain since early May.
“There was quite a decent-sized jump” in supplies, Nic Brown, the head of commodity research at Natixis SA in London, said in a telephone interview. “After a period in which copper stockpiles have been falling steadily, you get an add that might make people think twice.”
On the LME, copper for delivery in three months fell 2.5 percent to $5,880 a ton ($2.67 a pound).
Prices will drop to $5,200 over 12 months, Goldman analysts said in a May 22 report.