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METALS-Shanghai copper up 2 pct; nickel hits new 27-month peak

* Short-covering, tight local supply boost ShFE copper

* Coming Up: China Industrial output April at 0530 GMT

(Adds analysts' comments; updates prices)

SYDNEY, May 13 (Reuters) - Shanghai copper rose as much as 2.1 percent on Tuesday on covering of short positions by investors due to tight local supply, while London nickel hit a fresh 27-month peak, underpinned by fears of a worsening supply shortfall.

"The copper market is tight inside and outside China," said Joel Crane, analyst at Morgan Stanley in Melbourne.

"Inventories are falling, we are in the midst of peak Chinese demand season, Chinese producers are going to export less, scrap availability is low...there are a lot of things acting to improve its fundamental picture."

More cues on the health of the world's biggest metals consumer will be available later in the day when China releases industrial output data.

The most-traded August copper contract on the Shanghai Futures Exchange jumped as much as 2.1 percent to 48,580 yuan ($7,800) a tonne, before trading at 48,160 yuan ($7,700), still up 1.2 percent on the day.

Traders said short-covering fuelled the gains in China copper. Chinese prices have also been supported as financiers have used copper as collateral to secure more favourable lending terms, locking its huge imports away from consumers.

Daily LME data showed copper stocks <MCUSTX-TOTAL> in official warehouses fell 3,000 tonnes to 205,325 tonnes, their lowest since October 2008. Separate data on Friday showed Shanghai stocks <CU-STX-SGH> are at 90,580 tonnes, their lowest since December 2011.

China's smelters have cut exports of spot refined copper over the past week to sell more in the domestic market where prices have risen, a move that could ease a supply shortage in the world's top consumer of the metal.

Adding to hopes for improved copper demand, China pledged on Friday to push ahead with a broad range of capital market reforms as it seeks to encourage more efficient capital allocation, increase foreign investment and improve transparency of its markets.

LME copper edged down by 0.4 percent to $6,854.25 a tonne as traders took profits on the 2 percent gains in the previous session.

In other metals, nickel continued a stellar run fuelled by a ban on ore exports by Indonesian that has consumers in China and Japan scrambling for supply.

Three-month nickel on the London Metal Exchange surged to as much as $21,625 a tonne - its highest since February 2012. That brought gains in the past week alone to almost 17 percent, while the rise so far this year stands at about 55 percent. It traded at $21,516 a tonne, up 2.8 percent.

The price of nickel ore from the Philippines has more than doubled since late February, as supplies have dried up from rival producer Indonesia, previously the world's biggest exporter.

"Such is the momentum behind this uptrend that many potential sellers are standing aside in anticipation of selling at higher levels," said broker Triland in a report.

Tensions over Ukraine and fears that an increasingly out of control conflict might eventually result in sanctions against Russia's Norilsk Nickel, a top nickel producer, have also boosted the metal.

The European Union imposed sanctions on Monday on a top aide to Russian President Vladimir Putin and the commander of Russian paratroopers as well as two confiscated Crimean energy companies, raising pressure on Moscow over its actions in Ukraine. 1/8ID;nL6N0NY3ZB 3/8

In other news, top global aluminium producer United Company Rusal Plc posted a net loss for the first quarter, missing analyst forecasts. The Russian company, however, was optimistic the depressed aluminium market was starting to turn around.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin ($1 = 6.2375 Chinese Yuan)

(Editing by Joseph Radford and Muralikumar Anantharaman)