It's been a bad week for Doctor Copper.
London Metal Exchange (LME) copper slumped 3% 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.
They are now being compounded by signs of manufacturing contraction in Europe and a sharp slowdown in the United States.
What triggered copper's midweek slide was the ISM's PMI showing U.S. factory activity at a 2-1/2-year low in April.
The headline reading of 52.8 was worse than expected, as was a drop in construction activity in March. On the London Metal Exchange, trading volumes have been falling across the board with the single exception of the small tin contract
It adds to accumulating evidence that the United States is starting to hit the economic brakes.
The Euro zone manufacturing pulse is weaker still. April's reading of 47.9 was an improvement on March's six-year low of 47.5 but marked the third consecutive month of contraction.
Analysts at BMO Capital Markets suggest the European slowdown may be in part structural as China pushes for greater self-reliance.
"Whether consumer or capital goods, we are seeing import substitution in China, which in turn is impacting European exports," they note. ("Divergent Metals Demand Expectations Highlight China's Self-Reliance Push", May 2, 2019).
Not that China is doing much to lift metallic spirits right now.
Both the official and Caixin PMIs came in lower than expected, indicating that Chinese factories are also struggling to gain traction.
Adding to the sense of gloom are falling trade volumes, a flashing warning light, as my colleague John Kemp argues, that "the global economy is only one more major shock away from recession." ("Global economy is close to stalling as trade falls," April 26, 2019).
You can start to see why base metals have given up their early-year gains.
It doesn't help that one of the weakest sectors, both in China and the rest of the world, is automotive, an important demand driver for metals such as aluminium.
Chinese automobile sales fell for the ninth straight month in March. Last year marked the first year of contraction in this previously booming sector since the 1990s.
Metal bulls are banking on the latest round of Chinese stimulus to kick-start demand and prices.
This is what happened with Beijing's two previous stimulus injections after the Global Financial Crisis and again in 2015-2016.
However, there is a growing awareness that this round of stimulus may turn out to be "metals-lite" as Beijing avoids the mistakes of past construction exuberance and directs more funds down consumer channels.
The latest growth boost will be smaller than the last two as well as being heavy on tax cuts and light on infrastructure spend, according to Jumana Saleheen, chief economist at CRU, speaking at the research house's April aluminium conference in London. It will, she said, be "less commodity friendly."
Infrastructure will be only "moderately improved" by the latest policy stimulus, said Xiao Fu, head of commodities market strategy at Bank of China, speaking at the same event.
The bank's read-through for commodities is that prices will be underpinned but still range-bound.
Others take a more bullish line. Citi, which has a call for copper to rise to $7,000, argues that stimulus is now starting to feed through into "hard demand data in March across construction and broader end-use markets."
The bank's proprietary "Copper end-use tracker" rose 5.9 percent in March, which it said was the highest single-month growth since August 2017.
The only consensus in a divided analyst community is that a Sino-U.S. trade deal will help, although to what extent is dependent on the uncertain outcome of the long-running negotiations.
Eastern promise from China? Manufacturing recession in Europe? Slowdown in the United States? Three moving parts in the global economic kaleidoscope.
Big directional fund money loves a good simple story and base metals are not capable of generating one at the moment.
Fund positioning on the CME copper contract has been largely neutral in the last couple of weeks, oscillating between small net long and net short.
Aluminium positioning, according to CITI, has "collapsed" to "possibly five-year lows".
On the London Metal Exchange, trading volumes have been falling across the board with the single exception of the small tin contract.
CME copper futures volumes have been sliding for six months. April's count was 27 percent lower than last year.
It's the same story in China, where Shanghai Futures Exchange copper volumes have fallen for nine consecutive months as speculators have migrated to more promising and less confusing sectors.
Money has been taken off the base metals table across the world. Even nickel, which has ridden high on the electric vehicles story, is being caught up in the uncertainty.
As ever with this sector, all eyes will be on China for evidence that the stimulus impulse is translating into a tangible improvement in metals demand.
There is still the risk that it will do no more than stabilise growth rather than lead to another mini metals boom.
The jury is still out. And while it is, expect the heavyweight fund players to stay out as well.
(By Andy Home)
(The opinions expressed here are those of the author, a columnist for Reuters.)
(Editing by Edmund Blair)