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METALS-Nickel, zinc bounce on steel rally, shut mine; copper dips

* LME/ShFE arb:

* LME copper inventories up a third since late April

* Vale to suspend output at Canadian nickel mine (Updates with closing prices)

LONDON, May 17 (Reuters) - Nickel and zinc rebounded on Wednesday after steel prices jumped, while nickel also received a boost from news that output at a Canadian mine would be suspended.

Meanwhile, copper was knocked lower by a fresh influx of inventories into warehouses.

Steel rebar on the Shanghai Futures Exchange jumped 4.3 percent, its biggest single-day rise since Jan. 10.

“Base metals shrug off a more bearish Western macro picture and react positively to the rally in ferrous markets,” Alastair Munro at broker Marex Spectron said in a note.

Nickel is mainly used to make stainless steel, while the biggest demand for zinc is to galvanise steel.

But Caroline Bain, chief commodities economist at Capital Economics, said there was little fundamental basis for stronger prices.

“I’m tending to put it down to trading strategies. Our China economic team have been saying for a while that growth in China will start to slow,” she said.

“We’re fairly convinced that the government are not going to launch any stimulus, they are very committed to reining in credit growth and taking the heat out of the property market.”

NICKEL - The prospects of less supply bolstered nickel prices after Vale said it would suspend operations at its Birchtree nickel mine on Oct. 1 because of weak nickel prices and declining ore grades.

“The company stated that the mine was already approaching the end of its viability but more importantly they blamed the current low price levels which raises the question of how many other operations are in the same position,” Malcolm Freeman of broker Kingdom Futures said in a note.

PRICES - The benchmark zinc price on the London Metal Exchange closed 0.6 percent firmer at $2,561 a tonne while nickel gained 1 percent to end at $9,215. They each shed about 1 percent on Tuesday.

DOLLAR - Metals were also supported by a weaker dollar index , which wallowed near its lowest since Nov. 9 due to an intensifying political scandal around U.S. President Donald Trump.

COPPER - LME inventories have climbed by a third since late April after data showed on Wednesday they added another 17,100 tonnes to 339,600. Copper had rallied after disruptions at major copper mines earlier in the year, but Bain said much of the lost output would likely be made up.

LME copper fell into the red after the data release and finished slightly weaker, off 0.02 percent at $5,610.

CHINA - Economic growth in top metals consumer China will just about make Beijing’s target of 6.5 percent this year, analysts surveyed by Reuters forecast, as it slows from 6.9 percent in the first quarter.

PRICES - LME aluminium, untraded in closing rings, was bid up 0.1 percent at $1,924 while lead traded 1.3 percent up at $2,110 after touching four-month lows on Tuesday.

Tin shot up 2.2 percent to end at $20,380, the highest since April 6 and biggest one-day gain since March 28.

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Editing by Elaine Hardcastle and David Evans