The base metals were strikingly divergent on Wednesday. Copper was down until mid-morning, but then it was off to the races, as it roared to finish at its intraday high of $4.1046/lb., up more than 11¾ cents. Nickel also rebounded from its mid-morning low, but not enough to reach positive territory as it closed at $9.5459/lb., down 13 2/3 cents. Zinc was well down from its pre-dawn highs, ending at $0.8316/lb., down a penny and three-quarters. Aluminum went ballistic, surging to a new alltime high of $1.4341/lb., up 2 2/3 cents, but lead remained unloved and unwanted, shedding another penny and three-quarters, to $0.7657/lb.

Copper blasted past the key psychological $4 barrier, and landed within kissing distance of its alltime high, as traders responded to the oil crunch, labor unrest in Peru, and factory orders that suggest demand may begin to pick up.

As the $4 mark has been a strong resistance level for so long, breaching it unleashed a torrent of stop/loss orders, as short sellers scrambled to cover their trades.

The Peruvian situation is provoking a lot of worry, even though it has yet to cause major disruptions, as it appears to be worsening.

Miners at Peru’s largest copper-zinc pit, Antamina, owned by BHP Billiton (BHP), are on strike, but a company official said its effect on production was minimal. Southern Copper’s Cuajone mine and Ilo smelter are also struck, but output has been largely unaffected.

However, workers at Freeport McMoRan’s Cerro Verde copper pit, Peru’s third largest, approved plans to strike, pending approval of a second assembly. Other miners are reportedly about to join in, as well.

The possibility of violence is high. The Peruvian government has declared the walkout illegal, and in response miners in hard hats marched defiantly through the streets of Lima yesterday.

Meanwhile, lead fell to a 16-month low as inventories monitored by the LME continued to rise, indicating a building surplus to Michael Widmer, a London analyst with Lehman Brothers. “One important reason is seasonally weak demand,” Widmer said. “The market looks relatively well supplied at the moment.”

And zinc, suffering its biggest intraday loss since mid-June, is facing the same oversupply problem, Widmer said.

Source: Copper Rockets up on Supply Concerns, but Lead Sinks More on Slack Demand

Nickel had a good day, falling from $10.50 in the pre-dawn hours but getting almost all the way back before closing at $10.475/lb., up 14 1/3 cents. Zinc spun its wheels, ending at $0.8612/lb., down a half-cent. Aluminum was modestly higher, adding less than a half-cent, to $1.3184/lb., while lead was pummeled, plunging to its intraday low of $0.8393/lb., down better than 3½ cents.

Though it was up for the first time this week, copper had a pretty unimpressive day, considering the action in the precious metals and energy markets, and that the Reuters/Jefferies CRB Index increased as much as 2.7%. Traders cited concerns that Chinese demand won’t be able to make up for declining US needs.

China’s imports of unwrought copper and semi-finished products fell 19.2% in May as compared with April. They were also off 9.8% in May, year over year.

Analysts expect that Chinese refined copper imports data, due at the end of the month, will show a drop of more than 6% from April to May as demand growth slows and domestic output ramps up.

Tighter monetary policies in the country are also likely to affect demand prospects. China’s central bank has raised the amount that lenders must hold in reserve by a full percentage point, suggesting authorities are anxious to hold down inflation that could develop as reconstruction work after last month’s earthquake begins.

On the supply side, inventories monitored by the LME rose 725 metric tons, to 121,275 tons, on Wednesday.

Protesters yesterday blocked roads leading into Southern Copper’s Ilo smelter and Cuajone mine in Peru, as mining companies throughout the country face escalating demands from workers and local communities.

Meanwhile, Freeport-McMoRan said output at its Peruvian copper pit Cerro Verde was as yet unaffected despite workers having gone out on strike over a contract dispute on Tuesday.

Source: Base Metals Remain Stagnant