HANOI, March 4 (Reuters) - London nickel prices hit their lowest in more than two months on Thursday while the Shanghai contract for the metal also dropped on concerns of oversupply in the nickel battery market after Chinese giant Tsingshan announced a major supply pact.

Three-month nickel on the London Metal Exchange shed as much as 5% to $16,555 a tonne, its lowest since Dec. 31, 2020. The most-traded June nickel contract on the Shanghai Futures Exchange tumbled as much as 6% to 130,510 yuan ($20,175.61) a tonne, its lowest since Feb. 5.

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 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.

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

FUNDAMENTALS

* LME copper fell 0.1% to $9,094 a tonne at 0256 GMT and tin declined 1.2% to $23,800 a tonne. ShFE aluminium rose 0.6% to 17,525 yuan a tonne, while copper lost 1.2% to 67,000 yuan a tonne.

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MARKETS NEWS

* The Japanese yen hit a seven-month low on the dollar as hopes that vaccine distribution and more government stimulus will drive the U.S. economy into a solid rebound lifted the greenback and benchmark Treasury yields.

DATA/EVENTS (GMT)

1000 EU Unemployment Rate Jan

1330 US Initial Jobless Clm Weekly

1500 US Factory Orders MM Jan

1705 US Federal Reserve Chairman Jerome Powell

participates in conversation on the U.S. economy

before virtual Wall Street Journal Jobs Summit

($1 = 6.4687 yuan) (Reporting by Mai Nguyen, Editing by Sherry Jacob-Phillips)