LONDON, Jan 3 (Reuters) - Copper prices traded in a narrow range on Tuesday, but sentiment was negative owing to a stronger dollar and deteriorating demand prospects because of weak growth in top consumer China and other major economies.

Meanwhile, benchmark nickel on the London Metal Exchange (LME) jumped more than 6% to $31,975 a tonne, its highest in more than three weeks, on expectations that a large short position maturing in January would have to be bought back.

Nickel was up 3.3% at $31,055 a tonnne by 1709 GMT while copper slipped 0.6% to $8,319.

Surveys of purchasing managers (PMIs) in China's manufacturing sector showed activity contracted at a sharper pace in December as surging infections disrupted production and weighed on demand.

A recovery in subway use in major Chinese cities sends "a powerful signal that China is waking from its COVID-induced slumber" said Giles Coghlan, an analyst at broker HYCM.

"However, that has not been felt in copper markets because of worries that both the U.S. and Europe are heading towards recessions while China's latest PMI prints show further falls," he added.

The generally weak backdrop for industrial metals can be seen in the discounts, or contango, for cash metal over the three-month contracts for copper , aluminium , nickel and tin .

For zinc and lead , the cash contract is trading at a premium, or backwardation, because of low stocks.

Stocks of zinc in LME-registered warehouses are at 30,475 tonnes for their lowest since August 1989 while cancelled warrants - metal earmarked for delivery - at 51% indicate more metal is due to leave LME warrant.

Lead stocks < are at 25,150 tonnes, near the 15-year lows hit in November, while cancelled warrants stand at 55%.

Overall, industrial metals were under pressure from the stronger U.S. currency, which makes dollar-priced commodities more expensive for holders of other currencies and can subdue demand.

Aluminium fell 2.3% to $2,317 a tonne, zinc was up 0.3% at $2,981, lead retreated 0.6% to $2,280 and tin jumped 3.3% to $25,410. (Reporting by Pratima Desai Additional reporting by Mai Nguyen in Hanoi Editing by David Goodman)