(Adds comment, detail, updates prices) MELBOURNE, Nov 9 (Reuters) - London nickel fell by more than two percent on Thursday to its weakest since October as hype over potential electric vehicle demand that drove last week's rally died down. The nickel market had been ignoring downside risks from policy developments in Indonesia and the Philippines, and instead was focusing on potential future demand from electric vehicle batteries, said Morgan Stanley in a report. "We (have) heard little to alter our view that producing NiSO (nickel sulfate) isn't particularly challenging/costly and we see near-term downside risk to price," it said. The bank expects annual demand for nickel from the EV sector to grow to 300,000 tonnes by 2025.
* NICKEL: London nickel fell by 2.4 percent in its biggest one-day slide since September, while Shanghai Futures Exchange nickel fell by 2.3 percent. Traders said prices were correcting after they surged by 10 percent across an industry week in London last week.
* CHINA: Appetite for nickel has been driven up as battery makers increasingly turn to the base metal to help power global electric car sales. Demand for nickel will outstrip global supply for the third year in a row in 2018, according to Chinese state-backed research firm Antaike.
* COPPER: London Metal Exchange copper eased by 0.4 percent to $6,824.50 a tonne by 0448 GMT, erasing a small gain from the previous session. Before posting its Wednesday gain, LME copper touched $6,780, its lowest since Oct. 11. ShFE copper slipped 0.5 percent to 53,530 yuan ($8,073) a tonne.
* SHFE ALUMINIUM: Shanghai aluminum fell 2.6 percent to its weakest since early August amid speculation that China's war on pollution could also hit manufacturers of aluminum products and curb demand.
* CHINA INFLATION: China's producer prices were surprisingly strong in October, while consumer inflation picked up pace, suggesting the world's second-largest economy remains robust despite expected curbs on factory output as the government pursues a punishing war on smog.
* JAPAN: Japan's core machinery orders tumbled in September, a decline that companies expect to continue into October-December in a sign that business investment is losing momentum.
* NICKEL: Brazil's miner Vale SA said on Wednesday it had received bids to invest in its New Caledonia nickel project as the company re-evaluates its nickel business.
* POLL: Resurgent industrial metals prices, powered by enthusiasm for the electric vehicle (EV) revolution and a Chinese pollution crackdown are starting to look overcooked - raising the risk of a correction next year, a Reuters poll showed.
* COMING UP: Germany Trade data for Sep
BASE METALS PRICES 0510 GMT Three month LME copper 6826.5 Most active ShFE copper 53530 Three month LME aluminum 2098 Most active ShFE 15480
Three month LME zinc 3183 Most active ShFE zinc 25370 Three month LME lead 2498 Most active ShFE lead 18790 Three month LME nickel 12395 Most active ShFE nickel 99020 Three month LME tin 19425 Most active ShFE tin 141740
BASE METALS ARBITRAGE
LME/SHFE COPPER LMESHFCUc3 695.45 LME/SHFE ALUMINIUM LMESHFALc3 -691.57 LME/SHFE ZINC LMESHFZNc3 446.42 LME/SHFE LEAD LMESHFPBc3 -1059.02 LME/SHFE NICKEL LMESHFNIc3 1799.86
($1 = 6.6305 Chinese yuan)
(Reporting by Melanie Burton; Editing by Biju Dwarakanath and Tom Hogue)