It was a good day for the base metals Wednesday as copper, nickel, zinc, and aluminum all recovered from their falls the previous day, while lead was the sole loser. Copper fell steadily for most of the day, but shot up almost vertically around 11am to finish up 5 ½ cents at $3.7438/lb.

Nickel dipped slightly in early trading, but staged an impressive rally starting in the pre-dawn hours to close at $8.3461/lb., up 21 ¼ cents. Zinc traded up and down all day, but ultimately ended up ¾ cents, at $0.8413/lb. Aluminum was down for most of the day, but rode a late rally to finish at $1.3279/lb., up ½ cents. Lead’s trading on the day was marked by large up and down swings. The metal ultimately closed just above its intraday low, down 2 ¼ cents at $0.9937/lb.

The base metals were all aided by sharply rising oil prices on the day, which persuaded traders to buy the metals as a hedge against inflation.

Copper was further helped by concerns that supplies from Mexico are unlikely to recover in the near future.

These concerns were spurred by an announcement from Group Mexico CEO Daniel Muniz that there is no date set to resume production at its Cananea Mine in Mexico. The mine, which averaged 130,000 tons of copper annually, has been closed for the past year because of labor problems.

“At this point we are unable to provide revised copper production guidance for the remainder of 2008 and we do not have a clear date when operations will resume at Cananea,” stated Muniz.

However, Kevin Norrish of Barclays Capital wrote that because the mine has already been closed for some time, “it’s not a fresh loss of production.” As a result, it seems unlikely that the situation will continue to negatively affect copper prices because the supply declines have already been built into current prices.

Source: Base Metals Rally, Still No Timetable for Reopening Group Mexico’s Cananea Mine