METALS-Nickel, zinc drop to new lows on weakness in steel, iron ore

* LME/ShFE arb: http://tmsnrt.rs/2oQ5nm2 (Adds quotes, updates prices, changes dateline from SYDNEY)

LONDON, June 2 (Reuters) - Nickel fell to its weakest levels in nearly a year on Friday while zinc hit a two-week low, pressured by weaker iron ore and oil prices plus concern about demand in top consumer China.

Zinc prices were also knocked by a jump in available inventories, showing that supplies were adequate despite the closure of major mines last year.

Both zinc and nickel are used in the steel industry so are sensitive to iron ore and steel prices while oil is a key input in mine production.

"The steel-related metals such as nickel and zinc are among the worst performers, feeling the pinch from iron ore. Oil is not helping. It's crashing after the disappointment from the OPEC meeting," Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan, said.

Spot iron ore has tumbled about 40 percent from this year's peak, although it had a brief respite on Friday, while Shanghai rebar futures fell for a seventh session in a row.

"My view is that at this point the downside in all the base metals is not huge. We'll probably see the last leg down and I would take that as an opportunity to go long," Torlizzi added.

* ZINC: Benchmark zinc on the London Metal Exchange had shed 1.7 percent to $2,526.50 a tonne by 1025 GMT, the weakest since May 18.

* ZINC STOCKS: On-warrant LME inventories - those not earmarked for delivery and therefore available to investors - climbed by 11 percent on Friday to 179,325 tonnes <MZNSTX-TOTAL>.

* NICKEL: LME nickel dropped 1.2 percent to $8,730 a tonne, the weakest since June 8 last year. Nickel declined for a third straight month in May and has tumbled 13 percent this year, the biggest drop among major base metals.

* COPPER: Three-month LME copper gave up 1.5 percent to $5,612 a tonne. "The market is stalling into a down trend channel from February's $6,204 high," Alastair Munro at Marex Spectron said in a note. A break below $5,602 would open up the potential for a move to $5,500, he added.

* ALUMINIUM: LME price dipped 0.5 percent to $1,917.50.

* CHINA: Base metals demand in China, the top consumer of industrial metals, is expected to taper off in the second half of the year, Richard Knights of Liberum said. "With growth in credit rolling off since November 2016, metal demand should follow from mid-year, just as supply growth in iron ore and coal markets is accelerating," he said in a note.

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(Reporting by Eric Onstad. Editing by Jane Merriman)