LONDON, Jan 10 (Reuters) - Nickel prices held near their highest in more than two months on Monday boosted by demand from the electric vehicle battery sector lowering stocks held in London Metal Exchange (LME) approved warehouses.

Benchmark nickel on the LME traded up 0.6% at $20,850 a tonne in official rings having last week touched $21,165 a tonne, the highest since November 24.

"Nickel stocks in LME warehouses are being drawn because they can be used to make nickel sulphate for the batteries used in electric vehicles," said ING analyst Wenyu Yao.

Electric vehicle demand has been particularly strong in China, where Volkswagen,General Motors, Toyota Motor Corp  and Tesla,are ramping up production. 

INVENTORIES: Nickel stocks in LME warehouses at 99,954 tonnes have fallen by around 62% since April 2021.

About 75% of the total is bagged briquette, easily crushed into small particles and dissolved in sulphuric acid to make nickel sulphate.

Cancelled warrants -- metal earmarked for delivery -- at 49% of total stocks indicate more metal is due to be delivered out over the coming days and weeks.

SPREADS: Worries about nickel supplies on the LME market have created a premium of $125 a tonne for the cash over the three-month contract , a one-month high.

ALUMINIUM: Production cuts in Europe due to soaring power costs are expected to fuel further rises in aluminium prices , which hit $2,980 a tonne on Friday, the highest since October 21.

It traded up 0.7% to $2,934 a tonne.

Aluminium stocks in LME warehouses at 911,500 tonnes are down more than 30% since mid-September.

OTHER METALS: Industrial metals overall were supported by a lower U.S. currency, which when it falls makes dollar-priced metals cheaper for holders of other currencies.

The dollar fell on Friday after December U.S. jobs data missed expectations. 

"Copper has come under pressure on the back of China implementing partial lockdowns in some cities to prevent the spread of Omicron," analysts at Marex said.