METALS-Nickel slips from 27-month highs, copper gains

* Nickel up 50 percent in year to date

* Sumitomo says could cut ferronickel output

* Coming up: U.S. core PPI for April at 1230 GMT

(Updates prices, adds comment, detail; previous SYDNEY)

LONDON, May 14 (Reuters) - Nickel prices slipped on Wednesday as a rally that had propelled the metal to 27 month highs ran out of steam, but concerns about tightening supplies are likely to keep prices supported.

Three-month nickel on the London Metal Exchange (LME) fell 1 percent to $20,781 a tonne at 0936 GMT, after rising the last six trading sessions. It hit its highest level since February 2012 at $21,625 a tonne on Tuesday.

Since Indonesia banned the export of unprocessed nickel ores in January, prices of ore and of refined nickel have soared. In China, traders have held on to their stocks, while producers there and in Japan scramble for supplies.

Chinese producers of nickel pig iron (NPI), a cheaper alternative to refined nickel used in stainless steel, are running out of options for their raw material supply, while stainless steel producers are buying up refined nickel instead.

Concerns about a shortage have helped nickel rise 50 percent so far this year, but analysts said the rally could be losing some momentum.

"We believe that the upside (for nickel) is capped by the resistance of $22,000 but having said that, a pullback is due for the metal and the near term support could be near the $18,950 level," said Naeem Aslam, chief market analyst at Ava Trade.

Highlighting supply concerns, Sumitomo Metal Mining Co Ltd , Japan's biggest nickel smelter, said there was an increasing risk it could cut production of key stainless steel ingredient ferronickel, amid growing concerns about ore shortages.

But despite the recent surge in prices, global miner BHP Billiton said on Wednesday it is in talks to sell its Australian nickel business, in line with its aim of simplifying the company.

And troubled Finnish nickel miner Talvivaara plans to delist its shares from the London Stock Exchange, leaving its only listing in Helsinki, in a bid to cut costs.


In the copper market, benchmark prices for the metal used in power and construction rose 1 percent to $6,915, supported by a shutdown at a South Korean copper smelter after an exlosion on Tuesday.

Eight workers were injured at the smelter operated by metals group LS-Nikko in the South Korean city of Ulsan, the company said.

Analysts said uncertainty about the outlook for demand from top consumer China is likely to weigh on copper prices as the economy slows.

The world's no. 2 economy might miss its economic growth target for the first time in 15 years as data points to a sharper-than-expected loss of momentum and top leaders are talking about a "new normal" of slower growth.

China consumes 40 percent of global refined copper.

"The copper price has got ahead of itself," said Helen Lau, a senior mining analyst at UOB-Kay Hian Securities, noting signs of weakness in China's economy.

"Activity is slowing down and property new starts have also slowed. In the medium term, we will see the summer slow season starting from June through July and August. That's why we are not surprised to see investors use this weak data to take profits," she added.

Looking at the longer term, Goldman Sachs upgraded its 12-month allocation for commodities to neutral from underweight, saying it expected an acceleration in global growth and a better outlook for base metals than it previously estimated.


Three month LME copper

Most active ShFE copper

Three month LME aluminum

Most active ShFE aluminum

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin

(Additional reporting by Melanie Burton in Sydney; editing by Susan Thomas)