The base metals were mostly in the green on Monday. Copper turned in a second strong day in a row, rising from the pre-dawn hours to the noon hour, before tapering off to finish at $1.5404/lb., up 15 cents.

Nickel was erratic, but with a slight down bias, closing at $5.0583/lb., down just under 10 cents. Zinc moved up modestly, ending at $0.5209/lb., up a tenth of a cent. Aluminum had a good day, adding more than a penny and a third, to $0.6119/lb., while lead tacked on less than a penny and a quarter, at $0.5241/lb.

Analysts attributed copper’s strong day to an extension of the short-covering rally begun late last week, as well as the surprising existing home sales data.

“There’s some bullishness coming back to commodities and copper is following that trend,” said Donald Selkin, of National Securities Corp. in New York. “People felt that the economy is going to start to turn around and that’s going to help out copper prices.”

Whether it’s a fool’s rally, only time will tell. Many traders were quick to jump on any positive sign regarding economic growth, but others warned that prices may be distorted this week by thin volumes associated with the Chinese Lunar New Year holiday.

For certain, yesterday’s stockpile numbers couldn’t have had many jumping for jot. Copper inventories monitored by the LME blasted higher by 14,800 metric tons, to 439,425 tons. You’d have to go back to December, 2003, to find a comparable stock level.

And the news from the business end of things was hardly encouraging, either. Caterpillar Inc. (NYSE:CAT), the world’s largest maker of construction and mining equipment, cut 20,000 jobs yesterday, citing declines in U.S. construction work, while Home Depot, the biggest home-improvement retailer, eliminated 7,000 jobs because of falling consumer spending.

Freeport-McMoRan, the world’s largest publicly traded copper producer, added to the gloom by posting a $13.9 billion fourth-quarter loss yesterday, and the company wrote down the value of some mines and other assets. It also predicted that sales of copper will be 9% less this year than previously forecast.

While Freeport CEO Richard Adkerson admitted that, “Business is weak because of the global economic situation,” he said he remains confident that infrastructure development in the U.S. and China will buoy copper prices in the longer term.

But Michael Jansen, of JPMorgan Securities in London, estimates that the construction industry, the biggest user of copper, won’t rebound until 2010 in residential housing and not for at least six months in non-residential markets. Jansen was the most accurate forecaster on copper for last year.

Source: Copper Surges