×

METALS-Nickel slides as investors shun risk, take profits

(Adds comments, updates prices, changes dateline from SYDNEY)

LONDON, Aug 11 (Reuters) - Nickel and other base metals slumped on Friday as investors dialed down risky assets amid tensions on the Korean peninsula and locked in profits from a recent rally.

Any new military conflict with North Korea would likely escalate quickly to the use of nuclear weapons, former U.S. defense officials and experts said.

"I think there's a combination of heightened geopolitical risk today and probably a bit of profit taking," said Caroline Bain, chief commodities economist at Capital Economics in London.

"Metals have had a good run and it's been underpinned by recent good activity data out from China, but I think it's gone a bit too far."

The industrial metals complex probably needs a correction in the region of 10 percent to get back into balance, Bain added.

The London Metal Exchange index of six base metals had climbed 13 percent in the past month up to Thursday's close.

* NICKEL: LME benchmark nickel was the biggest loser on the exchange, falling 3.1 percent to $10,640 by 0918 GMT after gaining nearly a quarter over the past month, touching a four-month peak on Thursday.

"We're probably not going to see a big drop in Philippine nickel output, we've got Indonesian exports resuming now and still high stocks of refined metal," Bain said.

"The market is tightening, but it's still very comfortably supplied, so it's hard to get too positive on nickel."

* CHINESE STEEL: LME metals were also pressured after Chinese steel rebar futures closed down 2.7 percent and iron ore futures fell nearly 5 percent in a selloff triggered by concerns the Shanghai commodities exchange will raise margins on rebar contracts to fight speculative trading.

Nickel and zinc were hit hardest since the former is mostly used in stainless steel while the latter's biggest demand is for galvanizing steel.

* ZINC/LEAD: Three-month LME zinc fell 0.6 percent to $2,919.50 while sister metal lead shed 0.8 percent to $2,347.

* ALUMINIUM: Trading data in aluminum show some investors are bracing for a correction from the recent rally, with demand weak and production cuts in China to reduce pollution likely to be not as big as expected.

LME aluminum dipped 0.2 percent to $2,032.50.

* COPPER: LME copper shed 1 percent to $6,361.50 amid indications that physical demand in China were faltering.

"After spending two weeks at levels not seen since November, Yangshan premiums have come under pressure, dipping today for the second time this week," Alastair Munro at broker Marex Spectron said in a note.

(Reporting by Eric Onstad, editing by David Evans)