Nickel prices surged to an eight-month high on expectations of strong demand from China, supply concerns and declining stockpiles.

Zinc touched its highest since August 2007, though new trading restrictions in China dampened gains, and aluminium rose to near three-year highs on speculation of Chinese capacity cuts.

Price gains across most industrial metals, however, were slowing after rallies driven by a surge of speculative investment. "The buying is tiring," said a trader in London.

Three-month nickel on the London Metal Exchange closed up 2.2 per cent at $US11,660 a tonne after touching $US11,690, the highest since December 7.

The stainless steel ingredient has been supported by rising stainless output in China and concerns over supplies from top ore exporter the Philippines.

Philippine output fell 24 per cent in the first half of the year amid an environmental crackdown, but prices at this level could stimulate increased exports, said Sucden analyst Kash Kamal.

Consumption of refined nickel exceeded output by 36,800 tonnes in the first half of the year.

Prices were supported by a fall in on-warrant stockpiles of nickel at LME-registered warehouses to the lowest since January after 5,682 tonnes of cancellations.

Benchmark zinc finished down 0.7 per cent at $US3096.50 a tonne after earlier touching $US3231.75, the highest since August 2007. The metal used to galvanise steel has risen on expectations of a large global deficit and a sharp fall in stocks.

China's crackdown on pollution could hurt the country's smaller zinc miners and support prices.

But zinc's appeal was dented by fee changes and trading limits introduced by the Shanghai Futures Exchange on Wednesday to cool speculative price moves.

Benchmark aluminium closed 1.1 per cent higher at $US2097 a tonne, close to a three-year high of $US2112 reached last Thursday on expectations of capacity cuts in China.

"We estimate that China's aluminium production will come in at 34.9 million tonnes this year, low enough to push the global market into deficit," said analysts at Bank of America Merrill Lynch in a note, predicting prices around $US1250 in the fourth quarter.

Euro zone factories recorded their best month of growth in six-and-a-half years in August, while Japanese manufacturing expanded at the fastest pace in three months.

Output recovered at Escondida in Chile, the world's largest copper mine, while Freeport McMoRan Inc looked set to agree with Indonesia on continuing to operate its giant copper mine in Papua.

Benchmark copper finished 0.2 per cent lower at $US6565, lead ended down 1.6 per cent at $US2377 and tin closed up 0.9 per cent up at $US20,525.