(Updates with closing prices)By Peter HobsonLONDON, March 12 (Reuters) - Zinc prices jumped to aseven-month peak on Tuesday, driven higher by a supplyshortfall, dwindling stockpiles on the London Metal Exchange(LME) and expectations of solid demand from top consumer China.
Benchmark zinc on the LME ended up 3.7 percent at$2,838 a tonne after touching $2,840, the highest since July 3.
The metal, used to galvanise steel, is up about 15 percentthis year.
Mines have begun to produce more zinc concentrate but notenough metal is being refined to satisfy demand, pushing stocksin LME warehouses to their lowest in more than a decade anddriving up the premium for nearby metal.
"The refined market is still very, very tight," said ICBCStandard analyst Marcus Garvey. "We're probably not going backto a refined surplus until next year."He also said recent increases in lending and localgovernment bond issuance in China suggests demand for metalswill remain solid through this year.
STOCKS: Headline LME zinc stocks have fallen to 59,200tonnes, the lowest since October 2007 . Between 50and 79 percent of warrants are held by a single entity and about a quarter of the metal is alreadyearmarked for delivery.SPREAD: Suggesting a shortage of immediately available metalon the LME, the premium for cash zinc over the three-monthcontract has surged to $49.50, the highest in two months. DEFICIT: The International Lead and Zinc Study Group (ILZSG)said on Monday the global zinc market deficit narrowed to 28,000tonnes in January from a revised deficit of 62,400 tonnes inDecember. The ILZSG showed a deficit of 384,000 tonnes last year andshortfalls of 442,000 tonnes and 128,000 tonnes respectively in2017 and 2016. Analysts expect a fourth deficit this year.
POSITIONING: Speculative investors trimmed their net longposition in LME zinc to 5 percent of open contracts at the endof last week from 9.3 percent in early February, according tobrokers Marex Spectron.
COPPER: LME copper finished up 1 percent at $6,472 a tonne,nearing a 7-month high of $6,540 touched on Feb. 25.TIGHT MARKET: Headline LME copper stocks at 112,725 tonnes are the lowest since May 2008, and between 50 and79 percent of warrants are held by one entity ,keeping the premium for cash metal over the three-month contract unusually high at $26 a tonne.
DOLLAR: The dollar weakened for a third day, helping boostmetals by making them cheaper for buyers holding othercurrencies.OTHER METALS: Aluminium closed up 1.4 percent at$1,873 a tonne, nickel rose 1.6 percent to $13,100, lead added 0.5 percent to $2,085 and tin ended 1.3percent higher at $21,325.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Top Base and Precious Metals Analysis - GFMS ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Tom Daly; Editing by Jan Harvey andDavid Evans)