It was a down day on the London Metal Exchange base metal market Friday, with some investors squaring their books ahead of the long weekend. Zinc was the most actively traded metal, with some 3,600 lots moved in early business. A trader with a ring dealer pointed out that "there has been some healthy volume in zinc." Zinc was indicated, on a three-month basis at $1,822.25/mt, still down on Thursday's kerb of $1,880/mt. Zinc stocks dipped 325 mt to 162,900 mt. Commenting on yesterday's gains across the commodities complex, Basemetals.com analyst William Adams said: "We still feel that it may be a spike on the back of short-covering and that the medium term economic climate probably suggests further weakness once the initial end of summer rally has run its course. As it happens it looks like the end of summer rally is coming early, but maybe the Chinese are choosing to refill the supply chain

ahead of their post-Olympic industrial start-up."

The trader backed up the fact that short-covering was a factor in yesterday's gains. He added that the rest of the complex, bar nickel and zinc, was drifting lower in premarket trade. Adams added: "With the LME closed on Monday and after such a strong run up this week, there may well be some book squaring, but initially it does look as though the sentiment remains bullish." Nickel ditched $670 to hit $20,825/mt in premarket trade. Nickel stocks increased 498 mt to total 46,830 mt in LME registered warehouses. Xstrata's closure of its Falcondo nickel plant earlier this week looks to be the first casualty of the base metal's recent collapse in price, as the Swiss mining giant attributed the suspension of operations at its 29,000 mt/year operation in the Dominican Republic to "difficult market conditions." The closure of the fourth-largest nickel facility on the world had a rapid impact on nickel futures prices.

Bellwether copper dipped $64 in early business to be indicated at $7,741/mt, while aluminium lost $30 to be seen at $2,818/mt. Standard Bank pointed out that: "Indonesia announced that it plans to limit production of tin, copper, gold, nickel, iron ore and coal, in order to support prices and also extend the operating lives of the mines. With the exception of tin, which will see production limited to 90,000 mt per year from this year, details regarding potential cuts in the other metals are sparse." Tin was indicated, on a three-month basis, at $21,450/my, having rounded Thursday's off session untraded. Lead regained that sinking feeling losing $16.75 to settle at $1,888.25/mt. Both alloys were untraded in premarket trade. "Chinese demand seems to be slowing year on year," said the trader. He added that copper demand was up a mere 2% year on year, "we would have liked to have seen a little more interest then this."

***************

This week we should see the Redstone specialty crew moving into McWatters to set up the site for preproduction. It cannot come too soon. At least Ni prices are recovering somewhat.