Zinc declined the whole day, barely coming off its lows to end at $0.8363/lb., down 2½ cents. Aluminum was modestly lower, shedding a bit more than a third of a cent, to $1.3145/lb., while lead’s freefall shows no sign of ending as it dropped another penny and two-thirds, to $0.823/lb.

Copper was weak in the wake of the rising dollar.

“The stronger dollar is impacting prices for copper today,” said Patrick Chidley, an analyst at Barnard Jacobs Mellet in Stamford, Connecticut. “Copper looks set to continue to fall.”

Traders are taking note of all the talk about the possibility of increased interest rates in order to support the dollar and fight inflation.

“The Fed should be much more willing to act to keep the economy going and prevent it from entering a recession,” Chidley said. “If they go ahead and start raising rates, that’s not going to happen. They run the risk of putting the U.S. into a recession, and that’s going to affect copper very negatively.”

But nickel rose to a three-week high after BHP Billiton, the world’s third-largest producer of the metal, said it will shut down an Australian smelter and refinery that produces about 2% of world supply.

BHP announced that it will rebuild of the Kalgoorlie smelter furnace, reducing nickel sales by 28,000 metric tons.

“It’s a positive driver for the market,” said Adam Rowley, an analyst at Macquarie Group in London. “With the disruption in Australia, nickel is moving to a balance from a surplus.”

The Kalgoorlie closure followed word from Minara Resources, Australia’s second-largest nickel producer, that it was cutting its output forecast by as much as 23%.

Supply may be an ongoing concern, as nickel inventories monitored by the LME have fallen 8.2%, to 47,220 tons, since April 30.

Source: Strong Dollar Hits Most Base Metals - But Nickel Rallies on Smelter Closure