Dr Copper’s health has taken a turn for the worse. After a brief rally this year, evidence is piling up that prices are going to head lower. Last week, warehouses tracked by the London Metal Exchange (LME) saw the biggest increase in metal than any time in the past decade. Copper prices on the LME have dropped 11% since the end of April.
The metal - known as Dr Copper because it seems to have an economics PhD for its ability to track the world’s economic health - started 2016 with a wave of optimism: prices were close to entering a bull market on expectations of production cuts and better Chinese demand. In March, money managers were the most bullish on US futures in nine months.
It didn’t last. There’s still a lot of copper stashed in warehouses around the world and money managers are now betting on more declines.
“There has been a significant turnaround in copper,” Edward Meir, a senior commodity consultant at INTL FCStone, said by phone from New York. “We may well test the year’s lows in the coming months.”
Copper for delivery in three months fell 0.1% to settle at $4,510 a metric ton on the LME. It set this year’s low of $4,318 in mid-January.
Copper’s decline also spurred losses in producers of the metal. The Bloomberg World Mining Index slipped 2.1 in New York on Friday, led by a 6% loss for First Quantum Minerals. 
Teck Resources and Freeport- McMoRan also dropped.
LME inventories fell 1.2% on Friday, the first decline in six days, to 210,675 tonnes. Last week’s increase totalled 57,000 tonnes, or 37%. Metal was mostly delivered into Singapore, South Korea and Taiwan. The LME doesn’t operate warehouses in China.
The flows may be because it’s now more attractive to send copper into LME facilities than elsewhere. The premium traders pay to obtain metal in Shanghai is near the lowest since 2012, Metal Bulletin data show. Warehouse companies often give incentives to convince metal owners to store with them.
“Metal already en route to China is being diverted to LME warehouses,” Leon Westgate, an analyst at ICBC Standard Bank in London, said by phone. “This is amplified by incentives being paid by LME warehouses.”
It’s unknown how much metal is stored in bonded facilities in China, which aren’t monitored and tax-free. Total inventories tracked by exchanges in London, Shanghai and New York are down 28% from a peak in March.
In another sign of too much supply, copper for immediate delivery is trading at a discount to three-month contracts. 
The contango has widened to $14.50 a ton. That’s a reversal from late May, when spot metal was $25.75 more expensive than later contracts.
Copper remains oversupplied and prices will “significantly underperform” other metals, according to Robin Bhar, an analyst at Societe Generale. There were fewer supply disruptions than expected this year and new mines will start churning out metal in 2016 and 2017, he said in a report this week. The bank estimated a surplus of 300,000 tons this year and average prices of $4,500 a ton.
“The recent dearth of production cutbacks to add to those already implemented threatens to generate a lower-for-longer scenario,” Bhar said. “A view took hold that prices had run ahead of fundamentals and that it was prescient to ‘sell in May and go away.’”
In other metals and shares: Aluminium, nickel, and lead fell on the LME while zinc and tin gained. Steelmakers also slumped. Brazil’s Usiminas and CSN were the two worst performers in a gauge of 43 global producers tracked by Bloomberg Intelligence, losing as much as 12% and 7.8%, respectively.