Nickel had some sharp ups and downs before closing in positive territory at $10.0939/lb., up 8¾ cents. Zinc had a long series of ups and downs before ending where it started at $0.8584/lb., unchanged. Aluminum shot higher during the pre-dawn hours then traded sideways, eventually adding a penny and two-thirds, at $1.3957/lb., while lead finally had a good day, advancing 2¾ cents, to $0.8323/lb.

Copper pushed higher on supply concerns and a declining dollar that makes the metal cheaper for holders of foreign currencies.

Inventories monitored by the LME were down 225 metric tons, to 124,000 tons, yesterday. Stockpiles monitored by the Shanghai Futures Exchange fell by 575 tons, to 33,417 tons, in the week ended Thursday.

The advance came despite reports of the end of strike action at Southern Copper’s Cuajone mine in Moquegua province, Peru.

Edward Meir, of MF Global, sees conflicting tendencies. “Technically,” Meir said, “look for two days of closes above $8,350 a ton to set up an advance to the old highs, but fundamentals argue otherwise, and suggest we are quite overextended here.” Yesterday’s close was $8,388/ton.

Aluminum vaulted to a three-month high on supply concerns. Alcoa said on Thursday it would temporarily idle half the production at its Rockdale, Texas, smelter because of local power supply problems.

Three of the plant’s six operating potlines – which produce about 120,000 tons per year – have been shut down as a result of the electricity supply interruptions.

“The Alcoa news has reminded the market of the highly dependent nature of aluminium supply on both the price and supply of power,” said David Thurtell, analyst at BNP Paribas.

Some are unconvinced by the rally. “We argue that the recent strength in aluminum and copper is unjustified by fundamentals and that investors should not get carried away (or out) and buy these moves,” wrote analyst John Reade. “There will be tactical opportunities to buy both metals this year, but not here.”

Source: Base Metals Are Strong

Nickel succumbed to selling after Friday’s rally, but came off its early lows to close at $10.7002/lb., down a bit more than 30 cents. Zinc was in a downtrend most of the day, ending at $0.9654/lb., down more than a penny. Aluminum was up in the pre-dawn hours but gave it all back, shedding a half-cent, to end at $1.3408/lb., while lead bucked the trend, tacking on nearly a penny, to $0.912/lb.

Copper more or less held its ground on falling stockpiles. Inventories monitored by the LME lost 975 metric tons yesterday, to 124,400 tons.

The others were mostly off, leading BaseMetals.com analyst William Adams to comment that, “After the weakness seen last week, the metals are well positioned to see some bargain hunting, but much will depend on how confident the market is.”

Well, isn’t that always the case?

Meanwhile, nickel took the biggest hit in the group. “Nickel prices are likely to continue to trade heavily over the medium to long term,” said JP Morgan analyst Michael Jansen. “This reflects two major price drivers — ongoing substitution towards nickel in pig iron in China (at the expense of cathode) and an acceleration in western world mine supply.”

With a host of new mines expected to come on line in the next few years, the increase in nickel supply from 2010 onwards could be “quite spectacular,” Jansen said.

“We now anticipate that the nickel supply/demand balance will be a significant surplus for 2008 into 2010 at least, and quite possibly for a year or two afterwards,” he concluded.

In company news, the Indonesian unit of Rio Tinto has sued a regional government in Central Sulawesi for issuing a mining permit to local firms while it is still negotiating with the government over the area.

Rio is in negotiation with central and regional governments to obtain a permit to exploit the La Sampala nickel deposit in Central Sulawesi.

And Nautilus Minerals has started a new collaborative exploration program in association with the Australian National University and Teck Cominco, to search for new seafloor massive sulphide systems in the waters off Tonga.

Source: Base Metals Still Floundering

Nickel continued to hit the skids, dropping throughout and just managing to come off its intraday low at $11.2279/lb., 46¼ cents.

Zinc failed to hold above $1, as it slipped to close at $0.9891/lb., down 2¾ cents. Aluminum was up most of the day though it came off its highs around noon, to close at $1.3432/lb., up less than a penny, while lead’s woes were prolonged as it fell to $0.9683/lb., down a penny and a third.

Copper was unable to take any heart in the rising gold and oil prices, as traders remained focused on economic worries.

Also playing in were rising stocks. Inventories monitored by the LME gained 2,300 metric tons yesterday, nearly 2%, to 124,950 tons, although that left stockpiles still 11% smaller than a year ago.

“The underlying cost drivers for the base metals are favourable for headline prices this morning, with crude oil over $130 a barrel and the US dollar softer, especially against the (renminbi),” JP Morgan analyst Michael Jansen said.

“However, the base metals are trading in a mixed fashion with demand concerns carrying slightly more weight today than the other factors,” he was forced to conclude.

Analysts at RBC Capital Markets advanced a different theory for the weakness in the industrial metals, writing that, “Open interest in the metals has fallen in recent days, so we wonder actually if there were some long base metals/short oil and gold strategies that were put on and forced to stop out.”

They added that, “Also, we have not really seen the presence of so-called ‘hot money’ players in the base metals markets in recent days and would imagine they are very active in the oil markets, at least helping to propel prices there.”

In company news, Japan’s Sumitomo Metal Mining Company, which intends to be among the world’s top five nickel producers in the next decade, announced that it will spend about ¥200 billion (US$1.9 billion) to develop a nickel mine in the Solomon Islands in the South Pacific.

The company plans a smelter for the Solomons that will start processing in 2013, with an expected output of 30,000 tons per year. Sumimoto also has two major projects under development in the Philippines, and shares a 21% state with Mitsui in New Caledonia’s embattled Goro project.

Source: Base Metals Remain Weak

Nickel rose slowly but steadily until mid-morning then went flat, closing at $12.1899/lb., up 15¾ cents. Zinc broke past $1 in the pre-dawn hours and continued higher, leveling off around noon at $1.0378/lb., up more than 6 cents. Aluminum had some sharp ups and downs to little ultimate effect as it gained less than a tenth of a cent, to $1.31/lb., while lead continued its comeback for a second straight day, adding 2¾ cents, to $1.0399/lb.

Copper traders continued to schiz out, vacillating between concerns over the stronger dollar on the one hand, and potential supply disruptions on the other.

Even though a nationwide miners’ strike in Peru was postponed for 15 days in order to allow for further negotiations, the market is still casting a wary eye on developments in that key metal producer.

“[Peru] is the world’s largest silver producer, and produces significant amounts of zinc and copper, consequently strike action could lead to higher prices for these metals,” said Fairfax analyst John Meyer.

To the south, in Chile, fears that recent strikes at Codelco plants could be resumed have been stoked after the Supreme Court ruled the state mining giant does not have to offer thousands of subcontractors full-time positions.

Subcontractors had agreed to end their 3-week strike on May 5 after a pledge from Codelco to make many of them full-time, and to pay a bonus.

Union leaders have already begun a hunger strike, saying that Codelco still has not acted upon the pledges it made last week.

Meanwhile, zinc’s gain yesterday was the steepest in 2½ months, as speculators placed bets that that the earthquake in China, the world’s largest producer of the metal, might put some curbs on production. As much as 11% of the nation’s smelting capacity, or some 500,000 tons, was probably affected by the quake, Reuters reported.

Disruption in China came on the heels of a strike at Skorpion’s zinc mine in Namibia, Africa’s largest. “The strike at the Skorpion mine and uncertainty over zinc production in China’s Sichuan province are now adding a new facet to what is becoming a very interesting story,” wrote RBC Capital Markets analysts.

Still, Max Layton, an analyst at Macquarie Group in London, isn’t pushing the panic button. Any impact from the earthquake “would be very small,” he said. The bank forecast a zinc surplus of 88,000 metric tons this year, rising to 202,000 tons in 2009 as new mines come on line.

Source: Industrial Metals Mostly Higher