LONDON, Sept 17 (Reuters) - Nickel prices climbed towards seven-year highs on Friday as supply fears resurfaced after an Indonesian government official said the country was looking at taxes on exports of the stainless steel ingredient.

Traders said profit-taking after the New York open weighed on nickel on the London Metal Exchange (LME), which was down 0.2% to $19,360 a tonne at 1600 GMT. Prices of the metal used in electric vehicle batteries touched $20,705 a tonne last week, its highest since May 2014.

“Inventories are low, demand is stronger than expected and supplies haven’t kept up. The idea of Indonesia imposing export taxes just adds to the mix,” one nickel trader said.

INDONESIA: Investment minister Bahlil Lahadalia said Indonesia is exploring the possibility of levying an export tax on nickel products with less than 70% nickel content to drive expansion of the country’s domestic processing industry.

INVENTORIES: Stocks of nickel in LME-registered warehouses MNISTX-TOTAL have dropped 35% since April to 171,714 tonnes.

Cancelled warrants -- metal earmarked for delivery -- at 35% and one company holding large amounts of warrants are also fuelling concern about a tight LME market.

This pushed the premium for cash metal over the three-month CMNI0-3 contract to $32 a tonne, up from $15 at Thursday's close.

ALUMINIUM: Prices of the metal used in the transport and packagaing industries are trading near 13-year highs on expectations that accelerating production cuts in China to control emissions will create large shortages this year.

“China needs to balance the environment against the economy. If push comes to shove, I would say China will always lean towards the economy,” said Julius Baer analyst Carsten Menke.

High prices have also been bolstered by concerns about disruptions in Guinea, which has large reserves of bauxite used to make aluminium feedstock alumina.

Three-month alumnium was up 0.2% at $2,885.5.

OTHER METALS: Copper fell 0.5% to $9,321 a tonne, zinc slid 0.1% to $3,078, lead slipped 1.2% to $2,180 and tin was up 0.3% at $34,140.