The base metals were mostly lower on Monday. Copper held onto Friday’s close until the late pre-dawn hours, but then was off sharply, bottoming near $1.75 at mid-morning before rallying to a finish at $1.828/lb., down 6½ cents from Friday.

Nickel hit a steep slide early, falling below the $5 mark shortly before New York opened, and staying there the rest of the day to close at $4.9804/lb., down more than 56 cents. Zinc was also off early, but a spirited morning rally propelled it $0.5036/lb., up more than a penny and a half. Aluminum followed much the same path but failed to break even at $0.8964/lb., down less than a half-cent, while lead was modestly lower, ending down just under a penny and a quarter, at $0.6747/lb.

Copper suffered through another down day as steeply rising stockpiles signal the global dropoff in demand.

Inventories monitored by the LME gained 7,275 metric tons (3.2%) yesterday, to 237,925 tons, forging a fresh high since mid-March, 2004. Nickel stocks are at their highest level since May of 1999.

Not only are prices “a bit weak,” said Simon Toyne, an analyst at Numis, but the “copper stock builds that have been going on the LME — the last few days have seen a number of thousands of tonnes … is a bit unnerving.”

On the slightly brighter side, “Copper as with most other spot traded commodities, is now into the cost structure, but probably a lot less deeply than some of the other metals,” Toyne added.

Copper is “looking a bit directionless,” says Gayle Berry, an analyst at Barclays Capital. “When prices are coming off quite a bit, you do tend to see the shorts beginning to look for a bit of cover.”

Berry believes that that “is what you are going to see much more of going forward—these violent swings in prices, given the size of the short positions being built in some of the metals.”

Meanwhile, “Until we either see some further large cuts in production or more importantly some signs of improvement on the demand side, it’s too early to get bullish” on nickel, said Adam Rowley, of Macquarie Group in London.

Some such cuts are already on the way. Nickel producers including Brazil’s Vale will slash production by about 140,000 tons this year and probably another 100,000 tons next year. That will narrow the global supply surplus to 20,000 tons next year from 30,000 tons this year and 95,000 tons last year, Macquarie said.

Source: Base metals mostly lower -  Nickel producers cutting production as demand slows and stockpiles rise