Nickel ended at a new peak of $29,950 a tonne on Tuesday, up 5.1 percent on Monday's close and more than 100 percent higher than at the start of the year.
The premium for cash metal above three-month futures stood at record high levels of $4,700, reflecting a shortage.
Stocks of nickel monitored by the London Metal Exchange rose 414 tonnes to 6,240 overnight, of which 1,782 were available to the market supporting global consumption of 3,600 tonnes a day.
Copper eased after sharp rises in previous sessions, as investors awaited signs of progress to end a strike at the world's largest copper mine, Escondida in Chile.
"Everyone is waiting for the outcome of Escondida. There was no news overnight. I think some people have been surprised about how long it has gone on. Normally these Chilean strikes end after a few days," a trader said.
Three-months copper futures on the London Metal Exchange (LME) ended down at $7,620 a tonne against $7,650.
A Barclays Capital weekly report said that nickel is now the best performing of any base metal over the past 12 years, on returns calculated from a simple hold-and-roll strategy.
"A sizeable portion of these gains are packed into the past two years, as nickel's excess return index soared from less than 200 in August 2004 to over 400," the report said.
A strike at Canada's Voisey's Bay nickel mine, run by Inco Ltd, and dwindling stockpiles have underpinned prices. On Friday, available stocks dipped to 870 tonnes, but analysts said measures by the LME to limit daily cash premiums to $300 a tonne were having the desired effect. "Nickel stocks are starting to dribble in and it looks as though the decision by the LME to intervene is capping the opportunity to make money," analyst Robin Bhar at UBS said.
The spike by nickel had raised concerns among suppliers that end-users would opt for less expensive alternative materials. China's largest nickel group, Jinchuan, has warned several times this month that soaring nickel prices could hurt consumers, and the firm's president last week called the LME "a paradise for speculators."
The strike at Chilean Escondida entered a third week on Monday, with the union rejecting a new wage offer and the mine owner BHP Billiton inviting workers to negotiate individual contracts. Aluminium closed flat at $2,480. Stocks in LME warehouses jumped 35,600 tonnes to 719,375 as stocks flowed into warehouses in Asia.
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