By Claudia Carpenter

Sept. 21 (Bloomberg) -- Copper headed for a second weekly gain in London on speculation a labor dispute at Peru's Southern Copper Corp. will reduce supplies of the metal. Nickel fell, narrowing the biggest weekly advance in almost three years.

Workers at Southern Copper's Ilo smelter and Toquepala and Cuajone mines will strike Oct. 2 for higher wages, smelter union General Secretary Arnaldo Oviedo said yesterday. Copper has gained 25 percent this year, partly because of disruptions at mines in Chile, Mexico and Peru.

``Prices are fundamentally justified,'' said Michael Widmer, a London-based analyst at Calyon, a member of the London Metal Exchange. ``The copper market overall is relatively tight.''

Copper for delivery in three months on the LME was unchanged at $7,890 a metric ton at 5:14 p.m., for a weekly gain of 4.5 percent.

Grupo Mexico SAB's Minera Mexico unit said it may miss deadlines on metal deliveries because of a strike at the Cananea mine, Reuters reported yesterday.

Southern Copper, owned by Grupo Mexico, Mexico's biggest mining company, has said before the labor dispute that it would produce 700,000 tons of the metal this year. That's about 4.6 percent of last year's global output of 15.1 million tons estimated by the Lisbon-based International Copper Study Group.

Demand for copper, used in wires and pipes, will exceed mine output by 157,000 tons in 2007, wider than last year's deficit of 90,000 tons, London-based Barclays Capital forecast this week.

Inventories of copper monitored by the LME dropped 800 tons, or 0.6 percent, to 132,575 tons today.

Nickel fell on signs steelmakers were holding off purchases. Stockpiles have increased almost eightfold since May.

Nickel for delivery in three months on the London Metal Exchange fell $100 to $32,500 a ton, and was up 14 percent for the week, the biggest such advance since September 2004.

Zinc dropped $44 to $2,860, lead increased $105 to $3,360, tin was $100 higher at $15,350 and aluminum dropped $34 to $2,408.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net