(Updates with closing prices)By Peter HobsonLONDON, Nov 28 (Reuters) - Zinc prices rose on Wednesday asfalling stockpiles and rising premiums for nearby metalhighlighted a short-term supply squeeze, halting a slide to10-week lows.The metal, used to galvanise steel, had tumbled more than 7percent from last Thursday's close as traders anticipated anincrease in supply and weakening demand from steelmakers.The benchmark three-month contract on the London MetalExchange (LME) fell to $2,393.50 a tonne on Wednesday,the lowest since Sept. 19, before recovering to close 0.7percent up at $2,452.
"There's near-term refined market tightness but at the sametime a very clear path towards softer conditions in 2019 giventhe significant build in concentrates inventories in China,improving smelter margins and a likely ramp up in production,"said Deutsche Bank analyst Nick Snowdon.
"At the same time you see some softness in the galvanizedsteel sector," he said.
Prices could fall to the low $2,000s and remain there untilsupply tightens again in the early 2020s, he added.
SPREAD: The cash zinc premium over three-month metal, at$93, had returned to near 10-year highs after easing earlier inthe week, suggesting shortages of immediately available metal. STOCKS: Zinc inventories in LME-registered warehouses fellby 1,025 tonnes to a 10-year low of 120,250 tonnes. WARRANTS: Exacerbating the squeeze, one entity was holding50-79 percent of zinc warrants. One entity was also holding50-79 percent of lead warrants. ZINC POSITIONING: Speculative investors were beginning toramp up bets on lower prices, with their net short expanding to3 percent of open contracts, brokers Marex Spectron said.
TRADE DISPUTE: U.S. President Donald Trump and Chineseleader Xi Jinping are due to meet for trade talks when theyattend this weekend's G20 summit.Trump's economic adviser said the U.S. President was open toreaching a deal but is ready to increase tariffs if there is nobreakthrough. China's ambassador to Washington said Beijing hoped for adeal and warned of dire consequences if U.S. hardliners tried toseparate the world's two largest economies. Fears that tariffs will damage growth in China, the world'sbiggest metals consumer, have helped to push industrial metalsprices sharply lower.
CHINA FACTORIES: Chinese factories are expected to haveincreased output for a second month running in November, aReuters poll showed.
CHILE STRIKE: The union at BHP's Spence mine inChile, which produced 198,600 tonnes of copper last year, saidworkers had started a strike after layoffs. OTHER METALS: LME copper closed 1.3 percent up at$6,200 a tonne, aluminium firmed by 0.1 percent to$1,933, nickel was up 0.2 percent at $10,800, lead rose 0.9 percent to $1,925 and tin finished down0.2 percent at $18,240.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Top Base and Precious Metals Analysis - GFMS ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Mai NguyenEditing by David Goodman)