Nickel Declines to a One-Month Low in Asia on Liquidity Concern

SINGAPORE, Sept. 2 -- Nickel dropped to a one-month low, pacing a decline in industrial metals, on speculation that slower bank lending in China may trim demand for commodities, including steel.

    Industrial metals also declined after global equities fell and the dollar rose, making raw materials priced in the U.S. currency more expensive for holders of other currencies. Nickel is used mostly to make stainless steel.

    "It's still very much a liquidity story," said Selena Ling, head of treasury research at Oversea-Chinese Banking Corp. in Singapore. "There is a lot of hype about a liquidity squeeze in China, mainly because they think second-half loans growth should be guided lower."

    Nickel for delivery in three months on the London Metal Exchange fell as much as 2.2 percent to $17,850 a metric ton, the lowest since July 31, and traded at 18,100 a ton at 10:30 a.m. in Singapore. Stimulus spending by governments around the world has helped to boost prices by more than half this year.

    "At the end of the day, a lot of the Chinese fundamentals are propped up by the government stimulus, so it's a question of when the demand story actually comes back into play," Ling said in a Bloomberg Television interview today.

    Record bank lending in China sent Shanghai's stock index up 48 percent this year and led to a rebound in real-estate sales and prices, adding to concern that asset bubbles may hamper the recovery.

    Dollar, Equities

    The Dollar Index, which measures the greenback against currencies from six major trading partners, rose for a second day today as equities slumped, renewing demand for a haven. The regional benchmark MSCI Asia Pacific Index dropped as much as 1.8 percent today, the most in more than two weeks.

    The drop in metals prices also triggered declines in related equities. BHP Billiton Ltd., the world's largest mining company, lost 2 percent in Sydney, while Rio Tinto Group, the world's third-largest mining company, fell 2.2 percent.

    Among other LME-traded metals, copper fell 0.6 percent to $6,162 a ton, zinc lost 1 percent to $1,835 a ton, and lead slid 0.3 percent to $2,070 a ton. Aluminum added 1 percent to $1,863 a ton, while tin hadn't traded as of 9:49 a.m. in Singapore.

    (Source: Bloomberg)