BEIJING, March 11 (Reuters) - The China Nonferrous Metals Industry Association said on Friday it would help regulators stabilise nickel prices after a record surge this week and warned producers to prevent malicious speculation.

Prices on the London Metal Exchange (LME) more than doubled on Tuesday to over $100,000 a tonne, forcing the bourse to halt nickel trading and erase deals.

Shanghai nickel futures soared more than 40% this week before being suspended on Thursday and plunged 17% to a trading limit after trade resumed on Friday.

"Current nickel prices have seriously deviated from the fundamentals, losing the guidance significance to the spot market," the association's nickel branch said in a statement, adding that soaring prices cause serious harm to the global supply chain.

The association said it would monitor the situation closely and urged industry participants to maintain market order, preventing irrational price spikes in nonferrous products.

The recent nickel rush was said to be likely triggered by China's giant Tsingshan Holding Group, which holds a large amount of short bets on the London Metals Exchange, leaving the market on the look-out for how the company covers its outstanding positions.

The association noted that regulators released copper, aluminium and zinc from China's state reserves to rein in prices last year which had "good effects".

It said Chinese companies are encouraged to develop resources overseas and noted investments in top nickel ore producer Indonesia have benefited both countries.

China has invested in several projects in Indonesia via companies including Tsingshan, Zhejiang Huayou Cobalt and GEM Co Ltd, with products ranging from nickel sulphate and mixed hydroxide precipitate to nickel matte and stainless steel.

(Reporting by Min Zhang and Dominique Patton; editing by Jason Neely)