The base metals were all in the red on Friday. Copper was all over the place, but stayed between $3.75 and $3.79, finishing near the lower part of the range, at $3.762/lb., down a penny and two-thirds.

Nickel fell off at the New York open, bottoming at $9.05, after which a late-day rally helped it back to $9.1777/lb., down 10¼ cents. Zinc sagged, ending at $0.8131/lb., down more than a penny. Aluminum held up until mid-morning, but then sold off, eventually losing 2 2/3 cents, to $1.3541/lb., while lead also came well off its mid-morning high, dropping three-quarters of a cent, to $0.8865/lb.

Copper dipped lower on signs that Chinese demand is slowing.
China reported that stockpiles monitored by the Shanghai Futures Exchange gained 13% this past week, to 42,935 metric tons. That’s their highest level since May 29. Chinese production in the six months through June rose 19% from a year earlier, the country’s statistics bureau said.

“Rises in Chinese production, and increased stock levels in Shanghai, are having a much more direct downward impact today,” wrote Edward Meir, of MF Global (NYSE:MF).

And Donald Selkin, National Securities Corp. in New York, said that “between slowing worldwide demand and increased Chinese supplies … It’s hard to justify higher prices right now.”

China watchers have now revised their estimate of copper demand growth there at around 5% a year, compared with earlier expectations of 10%.

Yet, “Copper prices have remained very resilient over the past six months, this despite a deteriorating demand environment,” UBS analysts wrote. “This counter-intuitive performance is a function of continued supply growth disappointments and risks which have plagued copper producers.”

And technicians, consulting their tea leaves, chipped in by saying that there is strong resistance at $3.80 and especially $4.00, but good support at $3.63-3.65.

Meanwhile, aluminum’s slump was also blamed on rising stocks. Inventories monitored by the LME rose 4,325 metric tons yesterday. That put them at more than 1.1 million tons, the highest level since May 2004.

“There’s no real shortage of aluminium as we’ve seen from the large stock builds this week,” said Lehman Brothers (NYSE:LEH) analyst Michael Widmer. “It’s hard to make a case for prices to move higher but fears of supply disruptions in China due to power shortages and relatively high energy costs are supporting the market.”

And in company news, a Companhia Vale do Rio Doce spokesman called rumors that Vale was preparing a bid for Freeport McMoRan (NYSE:FCX)“totally baseless.”

Source: Base Metals See Red