London Metal Exchange nickel Monday defied expectations of a selloff, and tin continued to make fresh highs.

The fundamentals of both metals are still bullish, but industry participants are increasingly voicing concerns that nickel's bull run is looking unsustainable.

LME nickel prices are at near record highs, having risen 62% since the start of the year to peak on March 16 at $48,500 a metric ton. The bull run started last year and was driven by dwindling inventories and a lack of fresh supply amid strong demand from the stainless sector and China.

But even producers, who would usually be the last to criticize high prices, have started to express the view that the nickel market has run away with itself.

Xstrata Nickel chief executive Ian Pearce said on a conference call earlier Monday that if nickel prices "continue to go considerably higher than we're possibly going to get demand destruction in the stainless steel sector going forward, which will hit consumption."

"Yes, there's upside potential for nickel prices, but our view of the market's fundamentals relate to the long-term value of nickel going forward," he said, adding that current prices are "unsustainable in the long term."

His comments echo concerns by China's Jinchuan Group Ltd. last week that nickel prices are becoming distorted by speculative and investment fund activity. He also warned of the risk of substitution away from nickel as a result.

The market largely "shrugged off the doom and gloom," an LME dealer said, and ended the kerb session at $42,495/ton, up3% on the day after an earlier two-week low.

A slight decline in nickel stocks and unconfirmed reports by sources close to Brazil's CVRD that its Goro project won't start production until 2011 and will likely not ramp up to full capacity for a further three to four years, underpinned prices.

"The market's precariously poised and could go either way again," a London broker added.

Tin continued to establish a fresh record high of $14,575/ton in illiquid conditions, with worries over future production at mines in Indonesia attracting very light consumer and trade interest.

Licenses allowing foreign companies to develop mines were due to be issued at the end of March but a parliamentary recess will likely delay their approval, further exacerbating the already tight market.

The other base metals were relatively quiet and continued to consolidate in recent ranges.

Momentum buying lifted LME copper away from intraday low and but a slump in new home sales in the U.S. capped the market's upside and left prices to close at $6,851/ton.