* GRAPHIC-2019 asset returns: tmsnrt.rs/2jvdmXl (Adds analyst comments, updates prices, changes dateline from BEIJING)
By Eric Onstad
LONDON, March 1 (Reuters) - Zinc rose on Friday on concern about shortages after inventories slid, but other industrial metals were softer after factory activity in top metals consumer China contracted.
Zinc mines have been ramping up, but smelters have not been able to keep up, so shortages of refined metal have persisted.
“Most if not all Western smelters are probably working flat out, but in China, with the environmental scrutiny clampdown, capacity is being cut and new capacity has been delayed,” said Robin Bhar, head of metals research at Societe Generale in London.
“The deficit in the refined market is being met by the drawdown in stocks, so that’s lending a lot of support to the zinc price.”
On-warrant zinc inventories MZNSTX-TOTAL in warehouses registered with the London Metal Exchange, material that is not earmarked for delivery, fell to 46,000 tonnes this week, LME data showed. That was the lowest since at least 1998, having more than halved so far this year.
Benchmark LME zinc was up 0.6 percent at $2,795 a tonne by 1142 GMT.
* CHINA PMI: Some metals were pressured after China’s factory activity contracted for a third straight month in February but at a slower pace, helped by improvements in domestic manufacturing, a private survey showed on Friday.
“There’s still a lot of caution because of trade tensions, China slowing and physical premiums are tracking sideways,” Bhar said.
* COPPER: Three-month LME copper dipped 0.1 percent to $6,506 a tonne, but was on course to end the week up 0.5 percent due to tight inventories.
* COPPER STOCKS: Earlier this week, available LME copper stocks MCUSTX-TOTAL fell to 21,600 tonnes, their lowest since 2005.
“The fact that spreads are not insanely backwardated at these levels of stocks tells you that there is some metal around but it isn’t necessarily on the LME,” said Guy Wolf, head of global market analytics at Marex Spectron.
The backwardation - the premium of cash copper over the three-month LME contract - CMCU0-3 was at $42 a tonne on Friday, compared to a discount of $23.25 a month ago, but far from a peak premium of $149 seen in 2012.
* PREMIUMS: China’s Yangshan copper import premium SMM-CUYP-CN fell to as low as $48 a tonne, the lowest since April 2017, suggesting weak physical demand.
* VEDANTA: Vedanta Ltd told an Indian court it had been incurring losses of 50 million rupees ($705,656) daily since the closure of its copper smelter in May.
* NICKEL: LME nickel, used to make stainless steel, gained 1.5 percent to a three-week high of $13,245, tracking the surging Chinese ferrous complex. Nickel on the Shanghai Futures Exchange hit 104,790 yuan, its highest since October.
($1 = 6.6997 Chinese yuan renminbi)
Additional reporting by Tom Daly in Beijing Editing by Edmund Blair