Could the worst really be over for the base metals? According to the experts, maybe not.

In the past few weeks, as some glimmers of economic recovery have filtered into the markets, the price of copper has taken a noticeable move to the upside -- it is up about 30% in the last two months, closing at US$1.87 a pound yesterday.

That is nowhere near the spectacular highs above US$4 a pound that were reached last year, when stories of people ripping roofs off churches or stripping copper wire out of abandoned buildings became routine. It is nonetheless an impressive move, and the copper equities have followed it with spectacular rallies this year. Shares of Canadian copper miners like Inmet Mining Corp. (IMN/TSX), Quadra Mining Ltd. (QUA/TSX), Lundin Mining Corp. (LUN/TSX), and First Quantum Minerals Ltd. (FM/TSX) have tripled from their lows last December.

Copper is the flagship base metal, and is often called "Dr. Copper" because of its ability to forecast the state of the economy in general and the metal markets in particular. But none of the other base metals have followed copper's recent rally, and industry experts do not expect that it will have very long legs.

Put simply, copper is up because the Chinese are loading up on strategic reserves as they begin to spend billions on infrastructure projects. Reports suggest that China alone has bought about 300,000 tonnes in recent weeks, and the result is the first notable decline in inventories on the London Metals Exchange since last summer.

Derek White, executive vice-president of business development at Quadra, said that a lot of the scrap metal that China was using during the boom times has disappeared from the market. Now it is trying to make up for its shortfall.

"My own personal view is this shorter-term buying has really been more of a restocking exercise, and trying to come to grips with the scrap situation," he said.

Augmenting that is a growing realization that China cannot just go and buy all the copper assets it wants. Last week, the Australian government blocked the Chinese purchase of the Prominent Hill mine for national security reasons.

Copper is also getting increased interest as an inflation hedge.

But none of this has much to do with the fundamental demand picture. Orest Wowkodaw, an analyst at Canaccord Adams, said in an interview that he has not seen "any real evidence" of a recovery on the demand side. Canaccord has downgraded some of the rallying copper stocks recently for that reason.

"We recognize there's a lot of momentum on the upside, and we're just trying to balance the inflation hedge and the stockpiling versus what's really happening on a fundamental basis, which doesn't look very good at the moment," he said.

When demand returns, there is hope that the move upward could be dramatic. Copper inventories are still paper-thin compared to other base metals. And mine supply will have trouble keeping up with demand now that the scrap processing market is almost gone.

"I think you may see copper drift down a little or move sideways in the shorter-term, but in the next 12 months I think you'll see it [move up] again," Mr. White said.

And as for the other base metals, industry experts see little hope for a significant short-term rally. Zinc, aluminum and nickel are still in over-supply situations, and many of the mines and smelters that are still running are losing money.

pkoven@nationalpost.com