Nickel slides to 5-week low on N. Korea tensions

LONDON — Nickel slid 5% to a five-week low on Friday after trading fees were raised in China to dampen speculation and steel prices dropped with other metals as investors shunned risky assets after more North Korean tensions.

Ongoing jitters about Chinese debt after a ratings downgrade and the prospect of higher US rates also weighed on the market.

Financial markets were rattled when North Korea said on Friday it might test a hydrogen bomb over the Pacific Ocean after US President Donald Trump threatened to destroy the reclusive country.

Some banks have begun to pare back credit lines to smaller trading companies holding industrial metals in South Korea, two industry sources told Reuters.

“For us, this North Korean tension is short-term market noise, it’s something that moves prices maybe one or two days,” said Norbert Ruecker, head of commodity research at Julius Baer in Zurich.

“We still have a cautious view on the metals segment overall. We think this speculative frenzy in industrial metals still has to deflate since prices are detached from fundamentals.”

Metals prices probably needed to correct another five to 10% to where they were justified by supply/demand fundamentals, Mr. Ruecker added.

The London Metal Exchange (LME) index of six metals surged 21% during the three months before its peak on Sept. 4 and has given up 3.50% since then.

China’s Shanghai Futures Exchange said on Friday it will hike the intra-day transaction fee to 30 yuan ($4.55) per lot on its nickel contract for January 2018 delivery to help stabilize a volatile market, a day after tripling the fee to 18 yuan.

Benchmark LME nickel was the biggest decliner in London, closing down 5.30% at $ 10,420 a ton, the weakest since Aug. 16. The weekly loss of 6% was the biggest weekly decline in six months.

Zinc dropped 2.30% to end at $3,031.

Three- month copper fell to its lowest since Aug. 16, touching $6,366 a ton, before trimming losses to finish at $ 6,457, down 0.40%.

More downside for copper is expected in the short term, said Stephanie Aymes, head of technical analysis at Societe Generale.

“The correction is likely to persist towards $ 6,395/$ 6,335, the 38.20% retracement from May,” she said in a note.

Among other industrial metals, aluminum fell 0.60% to close at $2,158, but gained 3.50% on the week, lead shed 1.20% to $2,483 while tin rose 0.40% to $20,525. —