Nickel soared to near $10.50 in the pre-dawn hours, fell sharply into the New York open, but rallied from there to close at $10.2603/lb., up 8 1/3 cents. Zinc slumped straight through, only coming off its lows at the end to finish at $0.8745/lb., down a penny and a third. Aluminum was flat until New York opened, then pushed higher all day, ending at its intraday high of $1.301/lb., up a penny and a quarter, while lead sagged without much relief, shedding 3 2/3 cents, to $0.8679/lb.

The pattern seems firmly in place at this time, days of no major changes in industrial metals’ prices, but with an overall down bias. Maybe this is what we’re in for until the U.S. economy gives an unequivocal signal as to which way it’s heading.

The negative sentiment was bolstered again yesterday as the Organization for Economic Cooperation and Development reported that it has cut its growth forecast to 1.8% this year and 1.7% in 2009. Those are the weakest numbers since 2002, reflecting the belief that the U.S. housing-led slowdown is spreading around the world.

Concurrently, London-based researcher CRU cut its estimate for this year’s demand growth in China, the world’s largest copper user, to a “high single digit,” compared with the 11% earlier projected. In contrast, China’s copper demand expanded 19% last year.

“Manufacturers of copper products are experiencing tight cashflow because of rising debt servicing costs after higher interest rates,” CRU said, the result of China’s central bank having raised rates to a nine-month high in December to try to curb inflation.

On the supply side, inventories monitored by the LME rose 1,250 metric tons, to 123,500 tons yesterday, after four days of decline. Including New York and Shanghai exchanges, stocks are equal or 3.5 days of global consumption, less than last year’s average of 4.9 days, but well above the 2-day supply they’d fallen to earlier in the year.

The Chilean Copper Commission is still projecting a shortfall of 46,000 tons this year, but predicts a huge surplus of 450,000 tons in 2009. That would be the first such surplus in seven years.

William Adams, of London-based Basemetals.com, summed it all up by saying, “I’m generally bearish now on metals for the rest of the year … The housing-market downturn and credit crunch will move around and affect Asian demand as well.”
Source: Base Metals Continue Weak – Huge Copper Surplus Predicted for 2009

Nickel flirted with the $12 mark around mid-morning, but then collapsed, closing at its intraday low of $11.7972/lb., down almost 11 cents. Zinc’s fuse was lit early in the pre-dawn hours and it rallied all day long, just coming off its intraday high to end at $1.0523/lb., up 4 cents. Aluminum also came well off its mid-morning highs but managed a gain of 2 cents, to $1.3504/lb., while lead was up sharply, easing just a bit late to $1.0496/lb., up more than 3¾ cents.

Copper rose to a one-week high, primarily on the declining dollar and inflation fears.

In addition, labor issues “still fester in the background, lending support” to the copper price, wrote Edward Meir, of MF Global.

Indeed, early in the day, leaders of a group representing employees of contractors for Codelco, the world’s biggest producer, said they might resume protests because workers had not received bonuses under the agreement that ended the recent strike.

In response, Codelco said that 23,000 contract workers have received bonuses, and Chile’s government said it is complying with the May 5 agreement.

But the market is delicately balanced. “What we have got on the downside are concerns about falling Chinese demand. Until we see that pick up, it is unlikely we are going to see a significant push higher,” said Barclays Capital analyst Gayle Berry, over against “what prevents (copper) from falling too far is still these supply-side concerns.”

Meanwhile, zinc headed for it best weekly gain since February, as traders remained uneasy about the extent of earthquake damage to processing facilities in China.

“If it’s sustained damage, it’s going to be a disruption that makes markets nervous,” said Giles Lloyd, a zinc analyst at London-based researcher CRU in London.

And as an additional side effect, “now there is likely to be even more demand for metal[s] as fabricators gear up for the reconstruction that will be needed following [the quake],” said BaseMetals.com’s William Adams.

In company news comes word from Australia that the major public servant-funded superannuation funds in that country have ruled out any plan to team with Chinese interests in a raid on BHP Billiton shares, undermining the latest in a string of rumors that has driven BHP’s shares to record levels.

Source: Base Metals Mostly Sharply Higher