LONDON, Feb 14 (Reuters) - Aluminium and nickel prices headed towards multi-year highs on Monday due to escalating fears that reduced supplies from Russia would exacerbate existing shortages of both industrial metals.
A Russian invasion of Ukraine could mean sanctions against Russian firms which include Norilsk Nickel supplying about 10% of the world's nickel and Rusal, accounting for around 5% of global aluminium supplies.
Russia has repeatedly denied it is preparing to invade Ukraine.
Benchmark aluminium on the London Metal Exchange was up 1% at $3,169 a tonne at 1037 GMT.
Prices of the metal used widely in the power, construction and packaging industries hit $3,333 a tonne last week, close to the record high of $3,380.15 hit in July 2008.
"There's a risk of sanctions on Russia, people are trying to stock up on aluminium and nickel," a metals trader said.
Nickel was up 1.7% at $23,450 a tonne, not far from the 10-year high of $24,435 a tonne hit in January. Nickel is used to make stainless steel and electric vehicle batteries.
STOCKS: Shortages can be seen in dwindling inventories in LME registered warehouses.
Aluminium stocks at 868,950 tonnes have more than halved since March last year. Cancelled warrants -- metal earmarked for delivery -- at 30% suggests more aluminium will be delivered out over coming days and weeks.
Nickel inventories at 84,894 tonnes have dropped 67% since April last year, while cancelled warrants stand at 50%.
SPREADS: Worries about supplies on the LME market have seen cash aluminium and nickel trade at a premium over the three-month contracts for some time.
SHANGHAI: Norilsk Nickel's cathode is deliverable against the nickel contract traded on the Shanghai Futures Exchange (ShFE). The contract too has rallied in recent days.
DOLLAR: Prices of copper used by investors as a gauge of economic health were down 0.7% at $9,787 a tonne.
Worries about demand in top consumer China and a stronger U.S. currency which when it rises makes dollar-priced metals more expensive are weighing on copper.
OTHER METALS: Zinc was down 0.5% at $3,607 a tonne, lead gained 0.3% to $2,285 and tin climbed 0.6% to $43,800.
Reporting by Pratima Desai; editing by Kirsten Donovan