US copper futures settled with modest losses on Tuesday amid some investor profit-taking following on Monday's fund-driven rally.
However, ongoing supply problems should continue to lend support and maintain the market's Bull Run, sources said. Emanuel Balarie, senior marketing strategist with Wisdom Financial, said on Tuesday's price retreat was due to the market's sizeable short-term movement seen in the last several weeks.
"I expect some type of further correction in the short term, but still see prices heading higher as China continues manufacturing and supply does not meet demand," Balarie said.
Copper for May delivery ended at $2.5355 a lb, down 1.20 cents, on the New York Mercantile Exchange's Comex division, after dealing between $2.5260 and yet another new life-of-contract peak at $2.5650, hit in overnight electronic trade.
For the year, the benchmark May contract has gained almost 28 percent, supported by worries over global supply and robust demand from China, which consumed nearly 3.76 million tonnes of refined copper in 2005.
Spot April eased 0.35 cent at $2.5735, after matching on Monday's all-time record for the Comex spot contract at $2.5850. The rest of the board closed mixed, from down 1.20 cents to 1.80 cents firmer.
Comex final copper volume was estimated at 16,000 lots compared with Monday's count at 13,965 lots. "Although copper prices are becoming insanely high, the fact that there are no bearish triggers on the horizon at this point should dissuade people from shorting it," said Edward Emir, metals analyst with man Financial.
London Metal Exchange (LME) copper warehouse inventories, which have been declining in recent weeks, may be reflecting the recent supply problems seen in Mexico, Indonesia, Chile, and Zambia.
LME stocks fell 4,475 tonnes to 116,200 tonnes on Tuesday, while Comex copper stocks dropped 14,618 short tons at 20,667 short tons on Monday's data.
"That was a big chunk of metal that just disappeared in Comex yesterday, so between that and the fact that Grupo Mexico was losing the equivalent of 28 lots of Comex production every single day and are going to be running out of concentrate soon are all very bullish," said one broker.
On Monday, the mining and metal workers' union said there were still no talks scheduled to resolve a 10-day-old strike at Grupo Mexico's La Caridad 140,000-tonne per year copper mine, as union leaders and bosses disagreed over who should represent the workers.
Meanwhile, copper users may start looking for substitutes for the red metal unless prices cease a sustained rise that has already taken them to records few would have imagined, an executive for a chief consumer said.
LME three-month copper ended at $5,542 a tonne, down $73 from Monday's kerb close as investors paused after on Monday's rally that took copper to a new record at $5,616.
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