The base metals were adrift on a red sea on Thursday. Copper declined steadily from the pre-dawn hours through the noon hour, after which it edged back up over the $2 mark to finish at $2.0121/lb., down 6 2/3 cents.

Nickel also sank all day, barely coming off its intraday lows to close at $5.465/lb., down almost 18 cents. Zinc followed a similar path, ending at $0.6421/lb., down 2¼ cents. Aluminum fell hard, giving up nearly 2¼ cents, to $0.6381/lb., while lead plunged more than 2 1/3 cents, to $0.6294/lb.

Copper led the industrial metal sector lower, as gloomy remarks about the future of the economy from Fed officials made their way into print.

The policy makers cited a “significant downside” potential for the economy, projecting that the recession will linger through this year with unemployment reaching as high as 9.6 percent. The forecasts are much more pessimistic than the Fed’s January estimates.

That led Edward Meir, of MF Global, to write that, “Some of the euphoria about an imminent recovery has perhaps gotten slightly ahead of itself,” and he predicted that copper may be in for a “further retreat.”

Also factoring in were the jobless numbers and the selloff on Wall Street, which raised questions about both the economy and the stability of the equities markets, which have seen a big runup in recent months.

Yesterday’s “setback in metals will not lead to yet another ‘buy the dip’ situation,” Meir added. The downtrend “may last for several more sessions, especially if overbought U.S. equity markets also show signs of fraying.”

Still, the stockpile situation continues to be supportive. Copper inventories monitored by the LME were down another 5,400 metric tons yesterday, to 336,075 tons.

In company news, Aluminum Corp. of China (NYSE:ACH) may take a smaller stake in Rio Tinto Group (NYSE:RTP) in order to win approval for its $19.5 billion investment, according to the Sydney Morning Herald.

Chinalco is open to letting Rio sell convertible bonds to other shareholders, reducing its planned stake from 18% to 15%, the newspaper said. That may allow the state-owned entity to avoid breaching foreign ownership rules, while placating investors angry at not being offered stock on the same terms.

Source: Base Metals Leaking Red