US copper futures traded down nearly half a percent in early business on Wednesday as traders digested June US housing data which continued to paint a dreary picture for the downtrodden sector, analysts said.
"We're reacting mostly to the drop in building permits, but we're only down a bit. There continues to be good support down near $3.50 (a lb)," said one trader down on the floor of the exchange.
Copper for September delivery was down 1.25 cents to $3.54 a lb by 10:24 am EDT (1424 GMT) at the New York Mercantile Exchange's COMEX division, dealing in a tight 4-cent morning range between $3.5255 and $3.5655.
Futures volumes were estimated at 2,254 lots by 9 am. The pace of US home construction rose 2.3 percent in June but building permit activity, a sign of future construction plans, sank to its lowest rate in 10 years. The Commerce Department said on Wednesday housing starts set an annual rate of 1.467 million units in June compared with a revised 1.434 million unit pace in May.
Building permits fell 7.5 percent in June to a pace of 1.406 million units. That's just above the 1.402 million unit rate seen in June 1997 and below the 1.48 million unit rate that economists had expected. "The permit number being the lowest, I think since 1997 or 1998, tells me that in order to cure or ease the inventory problem we need less homes being built. So for the longer-term perspective you want lower numbers. From it's contribution to the economy perspective, it's obvious it remains a drag and will continue to be," said Peter Boockvar, equity strategist with Miller Tabak & Co in New York.
The market continued to find support from lingering production problems in Canada where a strike at Xstrata Plc's Canadian Copper Refinery (CCR) entered its sixth week.
Also, production at Codelco's Andina division continued to be suspended due to bad weather and protests by subcontracted workers. Supply-side fundamentals showed London Metal Exchange copper warehouse stocks fell by 775 tonnes to 98,625 tonnes on Wednesday, while COMEX stocks declined 134 short tons to 21,360 short tons on Tuesday.
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