Many base metals have hit multi-month lows, with copper now below $7,400 a tonne, its weakest level since August. The S&P GSCI Commodities index, which tracks 24 raw materials, has fallen by 2% this year.
On the one hand, demand is lacklustre. Japan's recovery looks weak; Europe remains in recession; and China has slowed. Only America is growing at a steady, albeit hardly spectacular, pace.
But the main story in the commodities market in recent months has been "a gradual build-up in supplies", says Rob Haworth of US Bank Wealth Management, to the extent that we're now "awash" in raw materials. This suggests that the commodities supercycle of the past decade, with producers struggling to meet the surge in demand, is over, says UBS.
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US crude oil stockpiles have reached a 22-year high. Base metals markets are mostly in surplus. Aluminium production in China, the chief source of a global glut, is expected to increase by 9% this year. Supplies of lead, nickel, and zinc will outstrip demand in 2013.
But the metal with the most eye-catching supply dynamics is copper, says Jack Farchy in the FT. Production is rising rapidly as miners' investment in new supplies has finally begun to pay off. 2013 should see the biggest percentage rise in global mine production since 2004, reckons consultancy Wood Mackenzie: over 4%.
That follows unusually high mine output growth last year. But average supply growth was less than 2% between 2003 and 2011. "Underperformance on the mine-supply side of the copper market has been the cornerstone of the bullish copper thesis for most of the past decade", says Barclays Capital. The trend looks over now.
Stocks have jumped as demand has stuttered and supply increased. In March, overall stockpiles jumped by 60% year-on-year. Inventories in warehouses monitored by the London Metals Exchange have doubled since early December. Those at the Shanghai Futures Exchange are at a record high.
All this adds up to "the end of an era for copper bulls", says Barclays. Copper is likely to fall further and underperform other metals, says Deutsche Bank. Its fair value is around $6,000 a tonne. Expect the red metal to approach this level over the next few years.
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