When the small amount of buying in the overseas market dried up by the Comex start, short-term players and arbitrageurs rushed to take profits instead.
Benchmark March copper at the Comex division of the New York Mercantile Exchange ended 1.05 cents lower at $1.4480 a lb., after dealing between $1.4250 and $1.4575.
Spot February fell 1.10 cents to $1.4760 a lb. The rest of the board settled with losses from 0.40 to 1.15 cents. Comex estimated final copper volume at robust 23,000 lots, compared with 28,481 contracts traded on Tuesday.
Traders said enthusiasm from Tuesday's annual Copper Club festivities in New York, where industry participants gather for business and socialising was expected to lift prices. "Everybody expected copper to be up during Copper Club week, and it was.
Then, everybody expected a selloff at the open and it did. It's the same junky trading," said a trader. Noting that prices were still climbing on a weekly basis, he added that he held a bullish view and saw on Wednesday's sell off as sifting some weak longs out of the copper market.
One floor broker said he thought funds were still on the long side of the market and adding to their positions. Another trader said he thought the market was still fairly neutral and players holding large short positions would get hurt on additional gains.
Dollar gains also undermined copper prices. But the US currency fell against the euro after Federal Reserve Chairman Greenspan testified on the central bank's view of the US economy before the Senate Banking Committee.
Greenspan said the US economy was expanding at a healthy pace and he signalled further interest rate hikes when he said the real federal funds rate "remained fairly low." It was a matter of buy the rumour and sell the fact for currency traders who said they found no surprises in the Fed chief's statement and sold the dollar.
Copper pulled off the lows when the greenback declined. A weaker dollar encourages purchases of dollar-denominated assets like copper by overseas investors. Also providing support to copper prices was a surpassingly strong US housing starts report.
January starts rose 4.7 percent to a near 21-year high in spite of inclement weather. Later, January industrial production held steady, though forecasts called for a 0.3 percent increase.
Despite the drag on the headline number from falling utility output, analysts pointed out that manufacturing growth remained healthy at 0.4 percent in January.
Traders saw that as another positive reading for copper's outlook. Three-month copper on the London Metal Exchange fell to $3,107 a tonne by the on Wednesday kerb close, down from the high at $3,150. Prices dipped below $3,100 to a low at $3,097, off on Tuesday's kerb close at $3,142 per tonne.