* LME/ShFE arb: tmsnrt.rs/2oQ5nm20 (Updates with closing prices)
By Eric Onstad
LONDON, Sept 22 (Reuters) - Nickel slid 5 percent 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 U.S. 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 U.S. 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 5-10 percent to where they were justified by supply/demand fundamentals, Ruecker added.
The London Metal Exchange index of six metals surged 21 percent during the three months before its peak on Sept. 4 and has given up 3.5 percent since then.
* ShFE FEES: 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 stabilise a volatile market, a day after tripling the fee to 18 yuan.
* LME NICKEL: Benchmark LME nickel was the biggest decliner in London, closing down 5.3 percent at $10,420 a tonne, the weakest since Aug. 16. The weekly loss of 6 percent was the biggest weekly decline in six months.
* FERROUS: Nickel and zinc, both mainly used in the steel sector, were also pressured by losses in Chinese steel prices, which slid to multi-week lows.
Zinc dropped 2.3 percent to end at $3,031.
* COPPER: Three-month copper fell to its lowest since Aug. 16, touching $6,366 a tonne, before trimming losses to finish at $6,457, down 0.4 percent.
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 38.2 percent retracement from May,” she said in a note.
* CHINA CREDIT: China’s attempts to reduce risks from its rapid buildup in debt are not working as quickly as expected and credit growth is still too fast, S&P Global Ratings said on Friday, a day after it downgraded the country’s sovereign credit rating.
* PRICES: Aluminium fell 0.6 percent to close at $2,158, but gained 3.5 percent on the week, lead shed 1.2 percent to $2,483 while tin rose 0.4 percent to $20,525.
Additional reporting by Melanie Burton in Melbourne; Editing by Elaine Hardcastle and Adrian Croft