Comex copper prices finished with healthy gains on Tuesday, as bullish fundamentals like striking workers in Mexico, declining inventories, and robust demand provide an underpinning, copper traders said.
"There was some profit taking during the day. But, the market is consolidating. I don't think anything has fundamentally changed. Right now there's not a lot going on, but I think it's going to consolidate and creep higher from here," said one New York dealer.
"After getting some of the weaker longs out of the market on the buy side (last week), there has been strong demand from the consumers," he added. Benchmark December copper on the New York Mercantile Exchange's Comex division finished 1.30 cents higher at $1.2970 a lb, trading between $1.2800 and $1.3080.
Spot October jumped 1.30 cents to $1.3040. The rest of the board closed with 1.20 to 1.80 cent gains. Comex estimated final volume at 7,000 lots fewer than the 11,435 lots traded on Monday.
Open interest fell by 3,383 contracts on Monday to 75,683. Traders said the consolidation phase is allowing the copper market to find its new range. On Tuesday, some players were taking profits, while others continued to probe for stop-loss orders thought to be set at $1.3050 per lb, and $1.3085.
Traders said they thought it would take awhile for copper to consolidate the heavy losses from last on Wednesday to give participants a chance to get over the dramatic rout. Copper fell a precipitous 10 percent and settled near one-month lows last on Wednesday after a series of factors conspired to unwind a heavily overbought market.
Despite last week's landslide, traders said they think copper remains fundamentally supported by tight supplies and firm global demand.
Copper futures gained in the overnight Asian market when workers at the La Carded facility, owned by world's third largest producer, Group Mexico, went on strike on Monday night.
The labour action comes four days into a walk out by colleagues at the company's Cananea mine in Sonar. Group Mexico said operations at La Carded continued, and that strikes at both Cananea and La Carded were illegal and therefore should be lifted.
But, the miners said on Tuesday they are already working on an appeal in case the government declares the strike illegal. La Carded produces about 140,000 tonnes and Cananea produces some 130,000 tonnes of copper concentrates per year, plus another 50,000 tonnes of copper at its SX-EW plant.
A sharp drop in US housing data brought sellers in even though buyers outpaced them. US housing starts slowed by a larger-than-expected 6 percent in September after two months of gains, but permits granted to builders outpaced expectations with a 1.8-percent increase, a government report showed on Tuesday.
Analysts said the drop in starts was mostly due to hurricanes, but the gain in permits, which are not impacted by weather, suggest housing construction remains strong.
London Metal Exchange three-month copper ended up $23 at $2,817 a tonne after reaching high of $2,836.