The copper price rally came to an abrupt halt on Thursday with the bellwether metal experiencing one of the worst one-day price drops on record.
On the Comex market, copper for delivery in December fell 5.9% to a low of $2.8540 a pound ($6,292 a tonne) amid heavy selling, with more than 2.6 billion pounds traded by 1pm in New York.
It was the biggest decline since mid-March at the height of the covid-19 induced sell-off, which sent the copper price crashing to below $2.00 a pound – levels last seen during the global financial crisis.
S&P Global reports a rapid buildup of inventories in warehouses managed by the London Metal Exchange could be behind Thursday’s decline after inflows of almost 92,000 tonnes over just three days.
TD Securities’ head of commodity strategy Bart Melek told S&P Global that “following months of steeply drawing inventories resulting from a powerful ‘V-shaped’ recovery in China, combined with a cascading global re-opening and constrained supply amid social-distancing enforcement at operations, the substantial inflows into LME warehouses have eased the near-term tightness that has propelled copper to multi-year highs.”
Thursday’s decline comes just a day after copper leapfrogged the pivotal $3 a pound level and looked ready to retake levels last seen in 2018, after a key gauge of the Chinese manufacturing sector, the world’s top consumer of the metal, showed new orders jumping to a nine-year high.
Capital Economics said China’s September PMI reading suggests that “the economy is now entering a period of above-trend growth, which is indisputably good news for the prices of commodities, particularly industrial metals.”
The Wall Street Journal reported Wednesday a measure from Citigroup that tracks end uses of copper in the country in various sectors, including auto and appliance makers, shows the three-month average reaching its highest level since early in 2017.