Nickel staged a very strong upmove, building on Wednesday’s short session gains to close at its intraday high of $5.7417/lb., up $1.205. Zinc also just backed off its intraday high, ending at $0.5606/lb., up nearly 6 cents. Aluminum was nicely higher at $0.6937/lb., up more than 3 cents, while lead soared, adding nearly 8 cents, to $0.5048/lb.

Copper closed at a 3-week high on Friday, as investors chose to open the new year with a brightened outlook.

Or not. Many were downplaying the day’s action, and that of the last couple of days of 2008 as balancing acts. Typically, commodity index compilers recalculate the weightings for the individual commodities in their indexes at the turn of each year, and the volatility associated with that can be unconnected to any definitive market sentiment.

Jiang Mingjun, an analyst at Shanghai Oriental Futures Co., called it “window dressing,” and added that, “For at least the first quarter, we’re still going to see higher inventory levels and lower prices … Movements in the U.S. dollar will also continue to drive the entire commodities complex and hence copper prices.”

Stockpiles are certainly not suggesting any copper rally. Inventories monitored by the LME gained another 775 metric tons on Friday, to 340,550 tons, raising them to near a 5-year high.

But the metal got a little additional support from news that two key Chinese domestic smelters, Jiangxi Copper and Yunnan Copper, will lose production due to equipment malfunctions.

Meanwhile, nickel also benefited from speculation that index funds will buy more industrial metals this month during re-weightings in their benchmarks. Nickel has gained gained 36% in the past four trading sessions.

But Edward Meir, of MF Global (NYSE:MF) said recent gains “will likely recede over the course of next week when participants return from holiday and conclude that the macro landscape looks depressingly unchanged from where they left it.”

Source: Base Metals Sharply Higher

Nickel pushed strongly higher through the day, closing at its intraday high of $4.7166/lb., up 30¾ cents. Zinc traded rangebound with a down bias, ending at $0.5017/lb., down a penny and a half. Aluminum fell way off in the pre-dawn hours and couldn’t recover, dropping almost 2½ cents, to $0.6625/lb., while lead moved higher, adding three-quarters of a cent, to $0.4258/lb.

Copper dropped off on Tuesday, as the grim global economic outlook took firm hold of the market.

Bad news out of Asia led the way, as South Korea’s industrial output slumped to a seasonally adjusted 10.7% in November from October, its biggest decline in 21 years.

Meanwhile, Japan’s economy will probably shrink at an annual 12.1% pace this quarter, the sharpest drop since 1974, Barclays Capital said.

Stockpile growth contributed. While it slowed a bit yesterday, copper inventories monitored by the LME still gained another 650 metric tons, to 337,350 tons.

Bloomberg reported: “Industrial metals as measured by the LME index are heading for a second consecutive annual drop. The 162-member Bloomberg World Mining Index has plunged 61 percent this year.”

Zinc’s outlook “remains bleak” for the next 12 months, according to a Moscow-based Troika Dialog report. “With all the major zinc consuming industries like car manufacturing and construction suffering the worst decline in many decades, zinc prices are unlikely to show much vigor until the second half of 2009, if not 2010,” the report said.

After easing somewhat in November, LME aluminum inventories are on the rise again. They jumped a whopping 49,000 metric tons, or 2.2% yesterday, to 2.30 million tons, the highest since 1994.

Looking ahead, though, Bloomberg reported: “China’s … Yunnan Copper Industry Co. will start storing their production as part of the government’s initiative to aid metals producers. Expenses incurred during the stockpiling period will be funded by bank loans with the inventory as collateral, and by provincial government’s subsidies, Yunnan Copper said.”

And copper output from Chile, the world’s biggest producer, fell 6.4% in November, the National Statistics Institute said.

Source: Industrial Metals Mixed