October 17, 2017 / 10:35 AM / in 2 years

METALS-Zinc hits three-week low as inventories rise and dollar firms

* LME/ShFE arb: bit.ly/2wZSAEz (Adds copper spreads, updates prices)

By Eric Onstad

LONDON, Oct 17 (Reuters) - Zinc prices slipped to their lowest in three weeks on Tuesday as the dollar strengthened and inventories rose, highlighting concern that increasing supply would ease shortages.

On-warrant zinc inventories on the London Metal Exchange — metal not earmarked for delivery from warehouses and available for investors — jumped by 17,850 tonnes, bringing the rise this month to 27 percent. MZNSTX-TOTAL

Zinc has gained 21 percent this year, touching its highest in a decade at $3,308.75 a tonne this month on concern about shortages, though these might soon be eased, analysts said.

“I think higher production should be on the cards in the short term because quite a few mining producers have flagged that they are going to increase output,” said Commerzbank analyst Daniel Briesemann.

“I see the zinc price falling back below $3,000 within the next month, maybe in the next few weeks.”

LME benchmark zinc fell 2.9 percent to trade at $3,103 a tonne by 1345 GMT after touching $3,081, the lowest level since Sept. 25.

* ZINC SPREADS: The premium of cash LME zinc over the three-month contract CMZN0-3 fell to $27.50 a tonne from $59 on Friday and a peak of $91 on Oct. 12.

This suggested that metal may be delivered against short positions as the main October contract expires this week. A high premium also indicates that people are prepared to pay more to secure near-term scarce supplies.

* SHANGHAI CURBS: Also pressuring zinc were moves by the Shanghai Futures Exchange to limit the size of December future positions and adjusting fees.

* DOLLAR: The dollar strengthened to a one-week high against a basket of major currencies, weighing on the entire base metals complex. A stronger dollar makes metals more expensive for investors using other currencies.

* COPPER: LME three-month copper shed 1 percent to $7,062 a tonne, hit by profit-taking after its biggest daily jump in eight months on Monday. Prices struck $7,177 in the previous session, the highest since July 2014.

* COPPER SPREAD: The shortest time spread on copper, tom/next CMCUT-0, which represents the premium to roll over a position for a day, soared to a high of $33 a tonne from a discount of $1.25 the day earlier.

Traders said some short position holders had to pay to roll forward after they were unable to close out their positions ahead of the expiry of the October contract on Wednesday.

* ALUMINIUM: LME aluminium bucked the weaker trend, rising 0.5 percent to $2,147 a tonne, supported by China’s campaign to reduce smog pollution and whittle down excess production.

* PRICES: Nickel shed 1.1 percent to $11,730 a tonne, lead fell 0.7 percent to $2,523 a tonne and tin gave up 0.8 percent at $20,445 a tonne.

* For the top stories in metals and other news, click

Reporting by Eric Onstad; Editing by David Goodman

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