(Updates throughout, moves dateline from SINGAPORE)
LONDON, July 10 (Reuters) - Industrial metals prices rose on Wednesday after U.S. and Chinese negotiators opened a new round of talks, raising hopes of resolving a year-long trade war, with nickel reaching a three-month high.
The U.S.-China confrontation has pushed metals prices sharply lower as investors expect weaker economic growth and metals demand.
Benchmark nickel on the London Metal Exchange (LME) was up 1.4% at $12,880 a tonne at 0920 GMT after touching $12,970, the highest since April 17.
But weak supply and demand fundamentals mean prices of the metal used in stainless steel will likely slip to $11,000 by year-end, said Capital Economics analyst Ross Strachan.
"Demand is pretty poor and auto sales are still pretty weak," he said.
FED: Investors were looking ahead testimony to Congress by U.S. Federal Reserve Chair Jerome Powell at 1400 GMT. Metals prices may fall if Powell signals a delay to interest rate cuts.
TRADE TALKS: U.S. and Chinese trade officials held a "constructive" phone conversation, White House economic adviser Larry Kudlow said, marking a new round of talks. Kudlow said the talks "went well" and were constructive.
CHINA: China's producer prices flatlined in June on lower oil prices and weak global demand, fueling concerns that a slowdown in manufacturing will further drag on growth in the world's largest consumer of metals.
NICKEL STOCKS: Inventories in LME-registered warehouses at 153,612 tonnes are the lowest since 2013, though stocks in Shanghai Futures Exchange (ShFE) storehouses have more than doubled in recent weeks to 21,811 tonnes. <MNISTX-TOTAL> <SNI-TOTAL-D>
SPREAD: The discount of cash nickel to three-month metal at $53.50 is down from its average around $75 over the last year, pointing to tighter nearby supply. <MNI0-3>
FUNDAMENTALS: There was a global deficit of 27,200 tonnes over January-April in the 2.4 million tonne a year nickel market, the International Nickel Study Group said.
Indonesia said this week it expected three nickel smelters to become operational in 2019 with processing annual capacity of 3.9 million tonnes of ore.
NYRSTAR: Nyrstar said it was extending force majeure at its Port Pirie lead and zinc smelter in Australia.
SCRAP: China issued a fresh batch of import quotas for newly restricted high-grade copper scrap and aluminum scrap.
ALUMINIUM: Bosnia's sole aluminum smelter was shut down on Wednesday over a huge debt it had incurred.
OTHER METALS: LME copper was up 1.3% at $5,888 a tonne, aluminum was up 0.7% at $1,833, zinc rose 1% to $2,386.50 and lead gained 1.2% to $1,944.50.
Tin bucked the trend, slipping 0.1% to $18,200 a tonne.
(Reporting by Peter Hobson; Additional reporting by Mai Nguyen; editing by Louise Heavens)