(Updates with official prices, adds speculative positions)
By Eric Onstad
LONDON, Oct 8 (Reuters) - Copper prices slipped on Tuesday as investors feared that U.S.-Chinese trade talks would make little progress, but the metal was vulnerable to a squeeze higher due to heavy bearish positions, an analyst said.
Washington blacklisted Chinese companies over Beijing's treatment of predominantly Muslim ethnic minorities while President Donald Trump said a quick trade deal was unlikely.
"The consensus remains sceptical about a resolution, but a mini-deal, just on tariffs, might be a concrete expectation," said Gianclaudio Torlizzi, Partner at consultancy T-Commodity in Milan.
"The risk-reward now points to the upside for copper and aluminium in particular because the short positioning is elevated," he said.
"This makes them vulnerable to a squeeze higher in case a truce between the U.S. and China is reached."
The net speculative short position for LME copper has risen to 12% of open interest, the highest in a year, while for LME aluminium it has climbed to 31%, according to estimates by Marex Spectron, the broker's Alastair Munro said in a note.
Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, will begin trade talks in Washington on Thursday, the first minister-level negotiations in several months.
Three-month copper on the London Metal Exchange (LME) failed to trade in official open-outcry activity but was bid down 0.6% at $5,687.50 a tonne, trimming gains of 1.4% in the previous session.
* ANTOFAGASTA: Chile's Antofagasta has requested government mediation to resolve a contractual dispute with supervisors at its flagship Los Pelambres copper mine, the supervisors' union said.
* COPPER SPREAD: The discount of LME cash copper to the three-month contract CMCU0-3 increased to $36.90 a tonne by Monday's close, the highest since August 2018, indicating plentiful supplies in the LME system. It was last at $36.65 on Tuesday morning.
* NICKEL STOCKS: LME nickel inventories MNISTX-TOTAL continued to fall on Tuesday to 117,522 tonnes, the lowest since August 2012.
Three-month LME nickel fell as much as 3.3% to a one-week low of $17,135 a tonne, but later pared the losses to a bid of $17,470 in official activity, a decline of 1.4%. It slipped for a second day after jumping 3.4% last week amid a drawdown in stocks.
* PRICES: LME aluminium was bid down 0.5% in official rings at $1,738 a tonne, zinc shed 0.7% to trade at $2,273.50, lead lost 0.6% to a bid of $2,176, while tin added 0.7% to trade at $16,445.
* For the top stories in metals and other news, click or (Additional reporting by Mai Nguyen in Singapore and Tom Daly in Beijing, editing by Louise Heavens)