Nickel plunged from the pre-dawn hours straight through the morning, only coming off its lows late to close at $9.939/lb., down more than 32 cents. Zinc was up and down all day with a slight upside bias, ending at $0.8818/lb., up three-quarters of a cent. Aluminum also pushed higher, adding a penny and two-thirds, to $1.3166/lb., up a penny and a quarter, while lead inched higher, adding a bit less than a penny, to $0.8769/lb.

It was a surprisingly good day for the industrial metals, modestly up though it may have been, considering that the economic numbers point definitively to recession and the decrease in demand that that will bring with it.

However, the upside for the metals is that the plunging dollar makes them cheaper for holders of other currencies, and that provoked a bit of buying in the markets.

On the supply side, copper inventories monitored by the LME were depleted for a change, dropping by 950 metric tons, to 122,550 tons, on Friday That came after they had risen by about 10% since the start of May.

Copper inventories monitored by the Shanghai Futures Exchange were also down, falling 13% to 38,829 metric tons in the week ended Thursday.

From a technical viewpoint, chartists say that copper holding at the key support level of $3.50 is a good sign, and they expect a test of the next level of resistance, $3.75.

And in the latest of a spate of labor problems, BHP Billiton reported that operations at its smallest copper mine in Chile, Cerro Colorado, had been hit by a truckers’ strike. Its larger mines have been unaffected as yet, Billiton said.

Source: Base Metals Mostly Higher

The base metals were mixed again on Tuesday. Copper peaked at $3.68 in the pre-dawn hours, then fell in stutter steps through the day, finishing at its intraday low $3.6363/lb., down 3 cents. Nickel about-faced, regaining some lost ground and pushing back over the $10 mark to close at $10.0834/lb., up 18¼ cents. Zinc sagged again, ending just off its intraday low at $0.8693/lb., down a penny and a half. Aluminum was tightly rangebound, finally adding less than a tenth of a cent, to $1.3073/lb., while lead rallied for a second straight day, tacking on nearly a penny and a quarter, to $0.9224/lb.

The blahs seem to have taken firm hold of the industrial metals, with yesterday being a day of little change, just like Monday.

Copper eased primarily on concerns about China, whose apparent consumption of copper concentrate was 438,600 tons in April of this year, down 3.73% year on year, according to the latest statistics from the China Mining Association. That’s the first drop since 2007.

In addition, the country’s import of copper concentrates dropped 31% in April to 128,000 tons. For the first four months of 2008, imports declined 517,100 tons, down 23% year on year.

Manufacturing growth in China also eased in May, according to the CLSA China Purchasing Managers’ Index, released yesterday. The gauge declined to a seasonally adjusted 54.7 last month from 55.4 in April.

Supporting the idea of a sagging market, copper inventories monitored by the Shanghai Futures exchange have surged by 85% so far this year.

Ben Bernanke played in, with a comment that, “Commodity prices will level out,” which is “consistent with our expectation of some overall slowing in the global economy and thus in the demand for raw materials.”

Reacting to the chairman’s words, John Kemp, an analyst at RBS Sempra Metals in London, rang the hallelujah bell, writing that, “Bernanke has finally admitted the central bank’s cheap-money and cheap-dollar policy is partly responsible for fueling the rise in commodity prices.”

The selloff was widespread, with the UBS Bloomberg Constant Maturity Commodity Index, a gauge of 26 raw materials, falling as much as 0.7% yesterday.

Source: Base Metals got the Blues – Data shows China Copper Demand Slowing

Nickel didn’t fare as well, sinking below the $10 mark and staying there to close at $9.8407/lb., down more than 17 cents. Zinc traded very choppily, ending at $0.9034/lb., up more than three-quarters of a cent. Aluminum pushed steadily higher through the day, adding better than 2 cents, to $1.3111/lb., while lead tacked on 2½ cents, to $0.8877/lb.

With the exception of nickel, the base metals closed a rough week with some modest gains as traders returned their attention to potential supply shortfalls, and shoved demand considerations to the back burner for at least one day.

Was the selloff overdone, and is a rebound coming?

“Copper’s fundamentals this year are very supportive — this is a market in deficit. We would expect to see any further drop from these levels as being short-lived,” said Gayle Berry, metals analyst at Barclays Capital.

Berry added that, “I would expect aluminum to remain really quite well supported … Smelters in China do face further power hikes that will further raise their costs of production.”

Copper also saw a drop in stockpiles. Inventories monitored by the LME fell by 1.450 metric tons (1.2%) yesterday, to 124,950 tons. In addition, the Shanghai Futures Exchange reported a decline of 44,554 tons in the past week, contrary to predictions that stocks would advance there.

Taking all this into account, Barclays Capital analysts wrote that, “Our expectation for softness in copper prices has been realized and we view dips below $8,000 a ton as a buying opportunity given tightening concentrate supply.” Copper was at $7912/ton yesterday.

Meanwhile lightly-traded tin, which has been the best metals performer of the past year, may have peaked. Open interest in tin futures, or contracts that have not been closed or liquidated, has slumped 12% in the past month, indicating that investors are finally pulling back after prices rose to an all-time high.

“Tin is such a thin market that, when sentiment turned, there is no depth,” said Stephen Briggs, an analyst at Société Générale in London.

Source: Base Metals Regroup – Tin Finally Starts Coming Down

Nickel followed a similar pattern, poking above $13 in the late morning and holding there, to close at $13.0408/lb., up 22 2/3 cents. Zinc clawed its way back over the $1 mark, ending at $1.01/lb., up more than a penny and a half. Aluminum was a modest gainer, adding a penny, to $1.3706/lb., while lead pushed steadily upward to its intraday high of $1.289/lb., up 2½ cents.

Copper rebounded strongly after three days in the red, as supply worries trumped demand fears, at least for the time being.

On the demand side, traders had been hoping that China would pick up any slack from the worsening U.S. economy. However, some of that optimism was dampened as the price differential between copper traded on the LME, as opposed to the Shanghai Futures Exchange, suggests that Chinese demand may be softening.

“The market realized that Chinese consumers are not buying copper at the elevated levels, and that the spread between copper in Shanghai and at the LME widened to around $938 (per tonne) last week,” said Peter Fertig of Dresdner Kleinwort.

Nevertheless, the Chilean situation is not getting any better. All but one of state-owned Codelco’s mines are now closed, as El Tienente joined the Andina and Salvador operations in shutting down, after an employee was injured in violence there. That left Norte, Codelco’s biggest division, as the only one running.

“The prospect of spreading Chilean strikes, across both worker classes and facilities, will keep the markets on edge until they are fully resolved,” wrote Edward Meir.

And Frank Holmes, CEO of the highly successful U.S. Global Investors funds, is unabashedly bullish.

“The demand side for copper is going to be very strong,” boosted by usage in China and other emerging markets, Holmes said. “We could see $8 a pound for copper,” he predicted.

In company news, diversified Canadian miner Teck Cominco is expecting business to continue to boom. Teck CEO Don Lindsay says he expects no demand falloff, and that, “There’s more than a reasonable chance that …our copper and coal businesses alone will generate record earnings…so the next 12 months look pretty good.”