UPDATE 7-Zinc hits one-week low on China restarts

(Adds New York to dateline, updates with New York closing copper
prices, adds analyst comments in paragraphs 17-20)

By Daniel Magnowski

NEW YORK/LONDON, May 20 (Reuters) - Zinc prices hit a one-week
low on Tuesday on news that supply from earthquake-hit China would
soon return to the market, but oil's surge to record highs helped
trim their losses.

Zinc futures MZN3 on the London Metal Exchange, which rose
almost 7 percent in the immediate aftermath of the quake last
week, fell to $2,235 per tonne, their lowest since May 13.

The metal closed at $2,275 per tonne in the official open
outcry trade, down $13 from Monday.

"Crude oil's making new highs and there's some bullishness
sweeping into the commodities complex," said economist John Kemp
at RBS Sempra Metals. "That's helping metals steady."

Bullish price forecasts from investment banks and tight
supplies of refined products pushed oil to a new record high near
$130 a barrel.

But, in the longer-run, supply-demand fundamentals matter.

Zinc, for example, has lost 8 percent since the start of the
year as investors factor in higher production.

Sichuan-based Nanfang Nonferrous Metals expects to restart
zinc production at its 10,000 tonne-a-year smelter in Deyang city
within a week and Hanzhong Bayi Zinc Industry has restarted more
than 80 percent at its 120,000 tonnes-a-year smelter in southern
Shaanxi, company officials said. [ID:nSP41864]

"This year generally, people have been expecting a lot better
supply, so maybe we are starting to see that coming through," BNP
Paribas analyst David Thurtell said.

Sichuan Hongda Co, the top zinc producer in the quake-hit
province, said 74 workers had died in the tremors and damage to
its zinc and chemical operations would cost 387.7 million yuan of
which 286.6 million yuan were fixed assets.

Macquarie estimated zinc production losses across Sichuan and
neighbouring areas, would total 20,000-30,000 tonnes, but traders
in China think the damage may have been more severe, suggesting
total losses from the quake at around 50,000-60,000 tonnes.

Most lead and zinc mines in quake-affected areas, including
Baiyin Nonferrous Metals' 70,000 tonne-per-year lead and zinc
operation, remain shut on government orders.

For a factbox on the impact of the quake on China's metals
industry, click on: [ID:nSP23019]

TIN SLIDES FROM RECORD

Copper for delivery in three months on the London Metal
Exchange MCU3 rose $5 to $8,320 per tonne after shedding 1.5
percent in the previous session following a rise in stocks on
Monday.

LME copper stocks fell 75 tonnes, following a 1,500-tonne
rise, to stand at 122,650 tonnes.

"We remain uninspired by the pricey base metals complex at the
moment although low stocks in copper prevent us being short this
metal," UBS analyst John Reade said in a report.

At the New York Mercantile Exchange's COMEX division, copper
for July delivery HGN8 ended up 0.10 cent at $3.7765 a lb, after
dealing in a session range between $3.7310 and $3.8005.

Michael Gross, futures analyst with Optionsellers.com in
Tampa, Florida, believed the copper market to be caught between
two competing forces.

"On the bearish side, we have stagnating physical demand out
of China, which is probably giving the market some pressure. Then
we have some external factors like the dollar which is mitigating
a correction right now," he said.

"If the dollar remains where it is, copper could very well
continue a bull run later in the year, especially if Chinese
demand comes back," he added.

Aluminium inventories jumped 22,175 tonnes to 1.07 million
tonnes, the highest since mid-2004. Aluminium futures MAL3 were
up $2 at $2,997 per tonne.

Daily average primary aluminium output in April rose to 70,400
tonnes compared with a revised 70,100 tonnes in March and 67,200
tonnes in April 2007, provisional figures from statisticians the
International Aluminium Institute (IAI) showed on Tuesday.
[ID:nL20622524]

Tin MSN3, which hit a contract high of $25,500 per tonne on
May 15, was down $345 from Monday's close at a quoted
$23,655/23,700.

"Tin remained under pressure and profit-taking continued as
the market expects that the recent rally would lead to higher
supply and lower demand," Dresdner Kleinwort said in a note.

Nickel MNI3 was down $75 at $26,000, and lead MPB3 was
down $60 at $2,170/2,175 per tonne.
Metal Prices at 1745 GMT:
Metal Last Change Pct Move End 2007 Ytd Pct

move
LME Cu 8320.00 5.00 0.06 6670.00 24.74
SHFE Cu* 62960.00 110.00 +0.18 56880.00 10.69
LME Alum 2992.00 -3.00 -0.10 2403.00 24.51
SHFE Alu* 19280.00 -55.00 -0.28 18180.00 6.05
COMEX Cu** 379.05 -0.50 -0.13 303.05 25.08
LME Zinc 2274.00 -14.00 -0.61 2370.00 -4.05
SHFE Zinc* 18535.00 -265.00 -1.41 18950.00 -2.19
LME Nick 25950.00 -125.00 -0.48 26350.00 -1.52
LME Lead 2170.00 -60.00 -2.69 2550.00 -14.90
LME Tin 23600.00 -400.00 -1.67 16400.00 43.90
** 1st contract month for COMEX copper
* 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading
on 26/3/07

(Additional reporting by Nick Trevethan in Singapore, Humeyra
Pamuk in London, and Chris Kelly in New York; editing by Jim
Marshall)