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* LME nickel breaks through $14,000 per tonne
* Batteries to account for higher pct of nickel usage long term
* LME Nickel vs U.S Dollar: reut.rs/2EmVtl2
* LME nickel stocks vs briquettes: reut.rs/2EmKPL5
* Nickel breaches key technical level: reut.rs/2DN42ok
* LME nickel stocks vs LME nickel: reut.rs/2DIbdhf
By Zandi Shabalala
LONDON, Jan 30 (Reuters) - A combination of surging China imports, tighter supplies and fund interest are expected to sustain prices of stainless steel ingredient nickel, which have reached their highest level in more than two years.
Benchmark nickel on the London Metal Exchange hit $14,040 a tonne on Monday, the highest since May 2015 and a gain of more than 55 percent since June.
"The fundamental story for nickel has started off well and it is looking good for at least the next couple of years," said Wood Mackenzie analyst Adrian Gardner.
Wood Mackenzie forecasts a deficit of between 80,000-90,000 tonnes this year following a deficit of similar levels in 2017.
The shortfall is likely to be particularly acute in China, which accounts for about half of global consumption estimated at around 2.1 million tonnes this year but where an environmental crackdown has shut capacity.
It is expected to ramp up imports. Latest data shows China's nickel imports more than doubled in December from a year earlier to 41,315 tonnes.
"There is still a decent amount of upside for prices from here," said ETF Securities commodities strategist Nitesh Shah, citing declining stocks and higher demand in China.
Fuelling the rally over the past couple of days was First Quantum Minerals, which said its nickel output dropped 24 percent last year to 17,837 tonnes due to its Ravensthorpe mine in Australia being shut since September.
Traders said the possibility of a force majeure at the Ambatovy nickel and cobalt mine in Madagascar, where operations were halted due to a cyclone on Jan. 4, was making the market jittery about supplies.
Also helping nickel is the U.S. currency's slide to three-year lows, making dollar-denominated commodities cheaper for holders of other currencies; a relationship used by funds that trade using buy and sell signals from numerical models.
The rally accelerated after nickel prices broke through a key technical level around $13,000 last week and funds bought the LME contract.
LME data shows funds' net long nickel positions at 47,708 lots or 286,248 tonnes on Jan. 26, the highest since a year ago and well above the 13,000 lots recorded in early December. LME-NI-MNET
One threat to the rally is the likelihood of higher production from Indonesia and the Philippines this year after a move by the top producers to pull back on restrictions targeting their mining sectors.
Still, also supporting nickel is buying by some funds on the expectation of rising demand for the batteries used to power electric vehicles.
Wood Mackenzie forecasts nickel usage in EV batteries at between 60,000-80,000 tonnes this year and 220,000 tonnes in 2025.
However, stocks of nickel briquette -- easily crushed into small particles and dissolved in sulphuric acid to make nickel sulphate used in lithium-ion rechargeable batteries -- in LME warehouses are still elevated.
They stand at 286,800 tonnes, up from 233,934 tonnes a year ago, or about 80 percent of total stocks.
Headline stocks in LME-approved warehouses are down 7 percent from a 2017 high to around 360,700 tonnes, the lowest level since October 2016. MNISTX-TOTAL
"Nickel inventories are high, but note recent declines have pushed prices up nonetheless - the direction of stocks matters, not the level," Bank of America Merrill Lynch said in a note
Reporting by Zandi Shabalala; Editing by Pratima Desai and Susan Fenton