Copper futures were down sharply at the close on Wednesday as light fund profit taking exaggerated the price decline in an exceptionally thin market, traders said.
With copper stalling after reaching contract highs last on Friday, traders said some funds may have gotten nervous and sold off some of the holdings along with other commodities.
"I think you saw commodity selling across the board probably by one fund. But most commodities corrected pretty sharply from coffee to oil. So you probably saw some basket selling today after the run-up on Friday," a dealer said.
At the New York Mercantile Exchange's Comex division, benchmark December copper fell 1.40 cents to $1.6470 a lb. By the close, in a lower range running $1.6405 to $1.6650.
Spot September copper lost 1.50 cents to end at $1.7210 a lb., in a $1.7175 to $1.74 a lb. trading band. Comex estimated final copper volume at 8,000 lots, similar to 8,091 lots traded on Tuesday.
Noting that copper prices traded up to contract highs on Friday, some players decided to book profits. Some traders said they thought copper may have seen the top, at least for the time being, but also thought fundamentals remained supportive.
They saw a sideways pattern developing on the copper chart. "Technically, copper has hit its targets on the upside. So I'm neutral on copper right now.
The fundamentals are still in place and I can't see selling it and it certainly doesn't look like a top yet, but the upside may be limited for the time being.
I think it's going to consolidate for awhile," one trader said. Metals-related US economic data have been thin this week, but questions about the outlook of the US economy are rampant in the aftermath of Hurricane Quatrain.
On Wednesday, a number of economists, including the Congressional Budget Office in Washington, downgraded their US third and fourth-quarter growth estimates by a half to 1.5 percent.
The slower growth pace was seen resulting from the havoc and devastation caused by the hurricane and the massive flooding in the city of New Orleans afterward.
While a slower economy overall could cut consumption for industrial metals like copper in the near term, other copper participants see the post-storm rebuilding effort generating new demand for the red metal later in 2005 and into 2006. "The funds are as skittish as anyone else. And they have been reacting to the economic downgrades for a year now. They have no idea what will happen any more than anyone else.
So their knee-jerk reaction is to sell (copper)," a trader said.
Elsewhere, a threatened strike at Mexico's giant open-pit Canine copper mine was averted late on Tuesday when workers signed an accord with management.
But labour disputes continued at Group Mexico's US Asarco unit where miners have been on strike since July. On the London Metal Exchange, three-month copper slipped to $3,632 a tonne by the on Wednesday evening kerb, down from Tuesday's close at $3,642 a tonne. London copper set a range from $3,625 to $3,675 a tonne.