Nickel Leads Decline in Base Metals Amid China Credit Concerns

Updated on
  • New loan growth fuels worries over nation's credit rating
  • Open interest in LME nickel contracts expands to a record

Nickel in London dropped from its highest level in almost two weeks as base metals retreated amid concerns that excessive credit growth is increasing risks in China, the biggest consumer of raw materials. Miners’ shares also fell.

The expansion in China’s debt relative to gross domestic product could pressure the country’s credit rating, Standard & Poor’s said on Tuesday, less than a week after the cost to insure Chinese bonds against default rose to a four-year high. Investors also aren’t convinced that producers have done enough to cut output. Open interest in nickel expanded to a record on the London Metal Exchange last week as traders boosted bearish wagers.

“Market sentiment changed as investors returned their focus to the fundamentals -- demand in China hasn’t recovered from the Lunar New Year break, while production is climbing after the holidays,” said Xu Maili, an analyst at Everbright Futures Co. in Shanghai.

Nickel, used in stainless steel, lost as much as 1.3 percent to $8,230 a metric ton and traded at $8,255 a ton by 3:30 p.m. in Singapore following its highest close since Feb. 4. All other metals in London fell.

Aluminum futures in China advanced to the highest level in almost four months before sliding as much as 1 percent. The country’s smelters pledged late last year to halt new mills and predicted an increase in idled capacity. BHP dropped 3.7 percent in Sydney and Rio Tinto Group fell 2.5 percent.

— With assistance by Alfred Cang

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