The base metals were all red-stained on Wednesday. Copper declined from the pre-dawn hours to the noon hour, but recovered a little ground late to finish at $1.4561/lb., down nearly 3 cents.

Nickel’s chart looked very similar, and it closed on a small upnote at $4.6954/lb., down more than 18 cents. Zinc had a weak day, ending at $0.557/lb., down a penny and a half. Aluminum was slowly lower, shedding a penny, to $0.6547/lb., while lead failed to get even a small late day bump, dropping to its intraday low of $0.5018/lb., down a penny and a quarter.

The industrial metals were down across the board, with copper leading the way lower after the weak retail sales numbers reinforced the notion that there isn’t anything bright in the metals’ future.

John Gross, publisher of the Copper Journal, sees the metal as rangebound at the moment, with key support in the benchmark March contract at $1.40 a pound, and key resistance at around $1.60.

“Depending on which way we break out of that range is going to dictate near-term conditions,” Gross said.

But most were more gloomy, with Edward Meir of MF Global (NYSE:MF) commenting that, “On the macro side, there is no evidence that things are getting better, and if anything, they seem to be getting worse … Producers are still not slashing production fast enough to get ahead of imploding demand.”

And giving the gloom a starkly personal touch was Mo Ahmadzadeh, president of Mitsui Bussan Commodities, who said that, “If you drive through New York, you would be astonished at how empty the streets are … It’s really ugly – unemployment is exploding which means spending is shrinking … the consumer side of the economy is deteriorating fast.”

Also factoring in was the index re-balancing buying, which fades away after the first couple weeks of the year.

Stockpiles are exploding at what seems to be an ever-increasing rate. Yesterday, copper inventories monitored by the LME roared higher by a stunning 7,300 metric tons, to 382,150 tons, yet another fresh 5-year high.

Stockpiles may surge another 57%, to 600,000 tons, in the next four to six months as demand continues to decline, in the view of commodity research firm CPM Group.

Meanwhile, China’s State Reserves Bureau has agreed to buy a total of 59,000 metric tons of refined zinc from seven state-owned smelters at 11,800 yuan per ton, smelter sources said yesterday.

That’s lower than the expected 100,000-200,000 tons, and it “reflects the over-all weakness of the market that the government has to go out and buy inventories,” said Michael Widmer of BNP Paribas.

Source: Base Metals See Red

Last 5 posts by Doug Casey

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