MELBOURNE, July 11 (Reuters) - Australia's BHP Group will suspend its Western Australia nickel operations from October, the miner said on Thursday, as it reels from a plunge in metal prices and an oversupply in the global market.

The world's largest listed miner intends to review its decision to temporarily halt the Nickel West operations and West Musgrave project by February 2027.

"We have not been able to overcome the substantial economic challenges driven by a global oversupply of nickel," said Geraldine Slattery, BHP's Australia president.

The unit expects to report an underlying EBITDA loss of approximately US$300 million in the financial year to June 30 2024. BHP said 3,000 people work in its Western Australian nickel operations, of whom 1,600 are front line staff who will be given an offer of alternative roles.

BHP will also invest around $300 million every year after a transition period to support a possible re-start of the nickel business.

The decision has been widely expected this year as global nickel producers have been squeezed by Indonesia's emergence as a supply powerhouse and by the move away from using nickel in some types of batteries.

Slattery said that BHP was more positive on nickel demand towards the end of the decade by which time, incremental investment, beyond Indonesian investment, would be required to meet demand.

The importance of nickel that can be produced with low greenhouse gas emissions is not fully recognized in prices at the moment, she told reporters on a call, but BHP anticipates this will change.

Nickel prices have recovered from three year lows below $16,000 touched at the start of the year, but they are still down by more than a quarter from year ago levels.

Australia has been trying to develop a processing industry to add value to mineral resources like copper, nickel and rare earths that are key to the transition away from fossil fuels, including moving downstream into battery chemicals production.

But producers are facing structural issues such as low prices and high construction and labor costs.

Australian battery metals producer IGO also said on Thursday it has paused a study to develop a plant to make precursor materials for battery chemicals.

From October, BHP will suspend mining and processing operations at the Kwinana nickel refinery, Kalgoorlie nickel smelter and Mt Keith and Leinster operations, and the development of the West Musgrave project as it starts its care and maintenance program.

BHP also raised by $300 million a $3.5 billion non-cash impairment before tax against the carrying value of the business that it flagged in February.

Any redundancy payments and other costs triggered by the decision would be recognized in the first half of the current financial year, it said. (Reporting by Melanie Burton in Melbourne and Rishav Chatterjee in Bengaluru; Editing by Subhranshu Sahu and Keith Weir )