Copper fell below $8,000 a ton for the first time in six months this week as prospects for a quick rebound in China's economy recede.
The metal has tumbled about 7% this month in the face of disappointing economic data from the world's top consumer. All the gains following the end of China's covid-19 lockdowns have been wiped out. Poor domestic demand has forced smelters in the Asian nation to ramp up exports that have helped replenish inventories elsewhere.
Funds are turning bearish with short positions outweighing longs for the first time in almost three years. It marks a rapid turnaround in sentiment since the first quarter, when Trafigura and Goldman Sachs were calling for copper to hit an all-time high within a year.
While the energy transition remains supportive of the long-term outlook for the bellwether metal, the absence of any big-ticket infrastructure spending announcements from Beijing means there's no safety net for investors.
"Metals markets have faced significant pressures after the disappointing April macro data from China, which have acted as a wake-up call to the weak reality on the ground," Citigroup said in a note.
There's also little help for the copper market from the U.S. The Federal Reserve's monetary tightening campaign has undermined demand, and recent comments from officials suggest the central bank may keep raising rates.
The metal fell as much as 2% to $7,944 a ton on the London Metal Exchange on Wednesday, the lowest since late November.
Goldman Sachs -- a notable copper bull -- said commodities prices would "come roaring back" should concerns over a global recession turn out to be misplaced. Copper will return to $10,000 a ton by this time next year, analysts including Nicholas Snowdon said in a note.
For now, a key spread is signaling supply is running well ahead of demand.
Supply is rising as some challenges faced by key miners have eased. First Quantum Minerals ended a months-long dispute with the Panamanian government in March. A hoard of copper in the Democratic Republic of Congo owned by China's CMOC is set to hit the market after being held up by a dispute over royalties.
That would mean "prices are going to head even lower," said Jiang Hang, head of trading at Yonggang Resources.
Copper's poor performance this year will disappoint investors who saw it as a pure way to bet on the energy transition. The metal is needed in everything from wind turbines to electric vehicles, and most analysts see those new sources of demand creating large deficits sometime in the next decade.