Analysts said physical demand remained sluggish for the metal used in power and construction, keeping prices in a tight range. "As we approach the end of the year, there is some book-squaring activity going on, and people have been taking profits, so copper has drifted lower," Andrey Kryuchenkov, an analyst at VTB, said. "There is a good chance that we could see a last-minute deal in the US to avert a fiscal cliff. Provided that goes ahead, it would be good for the base metals market. However, for the gains to be sustained for the likes of copper, we need to see more evidence of improvement in spot demand."
Three-month copper on the London Metal Exchange (LME) traded at $7,926 a tonne at the close, down 1.2 percent from Tuesday's closing bid of $8,024 a tonne. Traders said US housing data added to doubts about copper demand prospects. The number of construction starts on houses fell 3 percent in November compared with the previous month, below economists' expectations, data from the Commerce Department showed. Copper fell to a session low of $7,912 per tonne following the announcement.
Republicans tried to squeeze more concessions from the White House on taxes in manoeuvring for a deal to prevent the US economy from going over the so-called "fiscal cliff" of tax hikes and spending cuts in the new year. Since a price rally of almost 8 percent from mid-November to a near two-month high on December 12, momentum has begun to fade, with traders cutting risk and squaring positions ahead of year-end. The metal is up more than 5 percent for the year. "With market participants closing their books ahead of year-end, we wouldn't really expect too big a change, especially in the industrial metals space, where it seems there is a consolidation going on from the recent shift higher," Stefan Graber, an analyst at Credit Suisse, said.
Also underpinning prices was a rise in the euro to a 7-1/2-month high against the dollar after data showed German business sentiment climbed for a second month running in December as confidence in the outlook surged more than at any time in the last 2-1/2 years. In other metals, three-month tin hit its highest since mid-March at $23,847. It fell back to finish at $23,500, down slightly on Tuesday's close of $23,525 a tonne.
Tin has been the top performer of the base metals this year, up 22 percent, and has been streaking ahead of the second-best performer, lead, which has gained almost 14 percent. Tin prices have hit successive eight-month highs for six of the last eight sessions, boosted by longer term technical buying and short-covering, RBC Capital said in a note. "While the longer-term prospects for tin continue to look positive in terms of price, the short-term risk would appear to have more downside than upside potential, given the recent run," RBC said.
Lead hit its highest since mid-September 2011 at $2,347.75 a tonne, before closing at 2,337, up 0.8 percent on Tuesday's close. Zinc closed at $2,086, almost flat on Tuesday's close of $2,090, while aluminium fell to $2,085 from $2,098 the previous day. Nickel closed at $17,750, down from Tuesday's close of $17,800.