Jul 20, 2011 (Dow Jones Commodities News via Comtex) -- --Comex futures lose momentum just below $4.50 a pound
--Losses cushioned by production constraints, China-demand view
--Traders cautious ahead of Thursday's EU summit
By Matt Day
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Copper futures pulled back Wednesday as traders cashed out to profit from the previous day's rise to three-month highs.
The most actively traded copper contract, for September delivery, was recently down 3.05 cents, or 0.7%, at $4.4375 a pound on the Comex division of the New York Mercantile Exchange.
Futures Tuesday rose to their highest levels since mid-April, boosted by a better-than-expected reading on U.S. home construction. The metal is sensitive to the growth outlook because of its widespread uses in construction and manufacturing.
But with lingering uncertainty over the threat posed to the global economy by U.S. and European sovereign debt, traders took the opportunity Wednesday to cash out.
"Our outlook for the industrial metals is still a very cautious one," FastMarkets analyst James Moore said in a note. Recent gains may prove to be fleeting, Moore wrote, as "the lingering threat of U.S. rating downgrade, debt issues facing Europe and slowing macro-economic indicators further undermine investor confidence."
Traders are also cautious ahead of Thursday's meeting of euro-zone leaders. European policy makers continue to debate the outlines of a financing package for Greece, and the worry that high debt in some of the currency union's members may rattle world financial markets has kept some pressure on the copper market in recent months.
Copper isn't likely headed for a sustained pullback, market participants say, as the metal continues to be supported by the widely held view that demand growth will outpace new mine supply this year. Recent weather and labor-related disruptions at mines in Chile, the world's largest copper producer, have bolstered that outlook.
"It is hard to escape the conclusion that...a combination of technical problems, low ore grades, civil and weather-related disruptions and acts of God will continue to constrain production," analysts with Sucden Financial said in a report.
On the demand side, traders continue to keep an eye on Chinese consumption. The country, the world's largest metals consumer and a driver in copper's rise to record highs in February above $4.60 a pound, has been grappling with high inflation, taking steps to limit lending and raising concerns that slower growth might hit demand for industrial metals.
Those worries haven't unseated the bull market in copper yet, however, as steady growth and industrial output in China continue.