The base metals were all deep in the red on Wednesday. Copper fell from the pre-dawn hours straight through the New York day, finishing at its intraday low of $1.4696/lb., down more than 6 cents.

Nickel also plunged daylong, just coming off its intraday lows late to close at $5.4242/lb., down 42¼ cents. Zinc was steady until mid-morning, but then sagged to its intraday low of $0.5538/lb., down 2¾ cents. Aluminum dropped slowly but steadily, ending at $0.705/lb., down just under a penny and a half, while lead also plummeted, giving up nearly 2 2/3 cents, to $0.5139/lb.

Copper skidded the most in two weeks after the weak jobs data generated some major cracks in the optimism that had been lately felt about a possible economic recovery. The recent rally, which was linked to the rebalancing of commodity indices, was stopped cold, analysts said.

“Index rebalancing is not going to be a viable substitute for end-user metal demand, which is still flat on its back, and neither will it make a dent in rising LME stock levels, which were up again today,” said Edward Meir of MF Global (NYSE:MF).

Indeed they were. As if to confirm the paucity of any new demand, copper inventories monitored by the LME rocketed higher by another 7,825 metric tons yesterday, to 351,325 tons, a level not seen in nearly 5 years.

Commenting on the day’s numbers, Matthew Zeman, of LaSalle Futures Group in Chicago, said: “The data that’s continuing to come out is extremely lousy … We’re losing more jobs. It’s not a pretty economic picture.”

Zeman added that, “We’ve been seeing a runup in optimism on Obama’s plan … [But] It’s likely to be fairly short-lived. Until we see a turnaround in some of the economic data, copper will have a hard time making a sustainable move higher.”

Michael Gross, of OptionSellers.com in Tampa, Florida, caught the grim mood by saying that, “Any rallies we see now will just be a correction in a somewhat sluggish market.”

On the production front, Chile’s state copper commission, Cochilco, said it was holding to its 2009 average copper price forecast of around $1.60/lb. The commission also trimmed its output forecast for the year to 5.473 million metric tons.

And Reuters reported that: “Spot fees paid to Chinese smelters to convert copper concentrate to finished metal are rising more after jumping by two-thirds in the fourth quarter last year, as term fees are set to rise and smelters worry about domestic copper demand.”

Source: Base Metals Reverse Course