HANOI, March 4 (Reuters) - London nickel slumped more than 8% on Thursday and prices of the metal in Shanghai dropped the most in nine months after a major deal by Chinese firm Tsingshan eased worries of battery-grade nickel supply shortages.

Three-month nickel on the London Metal Exchange dropped as much as 8.5% to $15,945 a tonne, its biggest intraday loss since December 2016.

The most-traded June nickel contract on the Shanghai Futures Exchange ended 6% lower at 130,510 yuan ($20,180.61) a tonne, posting its biggest intraday loss since May 2020.

China's Tsingshan Holding Group, a nickel and stainless steel giant, will provide 100,000 tonnes of nickel matte to Huayou Cobalt and battery materials maker CNGR Advanced Material.

Nickel prices have surged partly on expectations of battery-grade nickel shortage, but Tsingshan's move could prove economically sufficient supply for the sector.

"Tsingshan's mass production of nickel matte triggered a supply-side reform. The supply bottleneck for nickel sulphate has been broken. There's limited room for nickel price to increase," Huatai Futures said in a note.

Nickel sulphate is an input material for electric vehicle batteries.

Huayou also said it would produce matte from nickel pig iron.

FUNDAMENTALS

* LME copper fell 1.4% to $8,974 a tonne, while tin declined 4.2% to $23,100 a tonne and zinc shed 2.6% to $2,716 a tonne.

* ShFE aluminium decreased 1.6% to 17,130 yuan a tonne, while copper lost 2% to 66,460 yuan a tonne and zinc fell 3.3% to 20,970 yuan a tonne.

* Russia's Norilsk Nickel expects production losses as two of its main mines remain partly suspended due to an ingress of water, CEO Vladimir Potanin said.

* Zinc treatment charges that miners pay to smelters to refine concentrate are expected to fall to $200 a tonne for 2021 from $300 a year ago due to tight mine supply, analysts said.

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($1 = 6.4671 yuan) (Reporting by Mai Nguyen, Editing by Sherry Jacob-Phillips and Uttaresh.V)