* Prices may fall to 150,000 yuan in next 1-2 months * Investors may stock up after making good margins previously By Polly Yam HONG KONG, June 14 (Reuters) - Chinese spot nickel prices may drop in the next one to two months as stainless steel mills cut demand, but this may allow investors to stock up the metal that generated profit margins of more than 25 percent in the last two years, trade sources said. Spot nickel prices NI-1-CCNMM dropped on Tuesday to 7-month lows around 171,000 yuan ($26,377) as demand fell from stainless steel producers, who mopped up the bulk of China's annual nickel demand of more than 500,000 tonnes in 2010 and 2011. Weak international prices also pressured Chinese prices. Three-month nickel on the London Metal Exchange hit its lowest since November 2010 at $22,120 a tonne on Monday, as worries about a growth slowdown and soft stainless steel demand in Europe triggered sales. The price stood at $22,230 at 0735 GMT on Tuesday. "Some investors and merchants may stock up nickel if prices drop to about 150,000 yuan," said a trader at a large Chinese trading and investment firm in Shanghai, who saw the price falling to that level as early as July given that stainless steel mills were not keen to buy spot nickel now. He added that some investors had built up nickel stocks when prices were around 150,000 yuan in June 2010 and sold the stocks above 200,000 yuan in the first quarter of 2011. That was not the first time Chinese investors pocketed hefty profits from nickel, traders said. In late 2008 and early 2009, many investors had stocked up refined nickel after the global financial crisis drove Chinese prices below 90,000 yuan.

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