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METALS-Zinc prices surge on supply fears, low inventories

    (Updates prices, adds Indonesia tin news)
    By Eric Onstad
    LONDON, June 21 (Reuters) - Zinc prices jumped on Tuesday on
concern over potential shortages resulting from falling
inventories and possible reductions in smelter output because of
high energy prices.
    Three-month zinc         on the London Metal Exchange (LME)
was up 3.2% to $3,628.50 a tonne by 1400 GMT, having touched its
lowest level in more than a month on Monday.
    LME zinc has shed 20% over the past two months along with
losses in other industrial metals, hit by concern over a
slowdown in top metals consumer China and potential global
    "Even though you have this quite bearish expectation about
slowing demand and weakening economic activity, some of these
metals markets are suffering from quite acute tightness," said
Tom Mulqueen, head of research at Amalgamated Metal Trading.
    "Today that's reflected in zinc, with the drawdowns from
warehouses, shortages in the U.S. and Europe, and a deficit
forecast for the year."
    LME data on Tuesday showed owners of more than 18,000 tonnes
of zinc in warehouses in Malaysia gave notice that they want to
withdraw the material, reducing available stocks by 30%.
In April, sources told Reuters that commodity trader
Trafigura and others were moving to take large amounts of zinc
out of LME-approved warehouses in Asia.
    The sources said at the time that Trafigura was bringing the
metal from Asia to Europe to replace lost production at
Belgium's Nyrstar         , in which it has a majority stake.
    Premiums for physical metal in Europe have soared owing to
zinc smelter cutbacks in the face of power prices that hit
three-month highs on Tuesday.

    * The premium for cash LME zinc over the three-month
contract spiked to $95.85 a tonne, its strongest since
November last year and up from $14.30 a week ago, indicating
short-term shortages of LME inventories.
    * Also supporting metals prices was a weaker dollar index
      , which makes commodities priced in the U.S. currency
cheaper for buyers using other currencies.
    * Major tin exporter Indonesia is planning to raise the
level of a royalty tariff imposed on the production of tin and
bring in a progressive structure tied to international prices, a
senior government official said on Tuesday.
    * LME copper         added 0.6% to $9,029.50 a tonne,
aluminium         rose 0.8% to $2,546, lead         gained 0.7%
to $2,083, tin         climbed 0.7% to $31,020, but nickel
        slipped 0.2% to $25,675.

 (Reporting by Eric Onstad
Editing by David Goodman and Paul Simao)

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