METALS-Zinc set to be top metals performer in 2013, nickel lags
* Investors bet zinc supply situation to tighten
* Nickel, aluminium worst performers, weighed by surpluses
* Higher copper supply in 2014 may trim gains
(Adds details, quotes; previous SINGAPORE)
LONDON, Dec 31 (Reuters) - Zinc looked set on Tuesday to be this year's best-performing industrial metal with a largely flat outcome, as investors bet mine closures would transform an oversupplied market into one facing a deficit.
Zinc is tipped by many analysts for gains next year after other base metals scored losses in 2013 as uncertain demand in a recovering global economy combined with largely ample supply.
Nickel and aluminium, with the heaviest surpluses, were set to be the worst performers, down 18 percent and 12 percent respectively.
Copper, with perhaps the widest investor focus, has slipped 7 percent in 2013, but the losses were more modest than many expected as an anticipated surge in new mine production faced processing backlogs, creating delays for refined product.
The metal is often referred to as "Dr. Copper" for its reputed ability to reflect the world's economic health since it has broad industrial uses ranging from construction to electricity supply to automobiles.
"The copper surplus has probably been underplayed at the current time by the fact that the cathode market's tight, but I look to that to start reversing, probably around the Chinese New Year" at the end of January, said Colin Hamilton, head of commodities research at Macquarie in London.
"I do still fear for copper that it has a bit of downside risk as we head to the end of the first quarter."
The strong supply situation was reinforced on Monday when top copper producer Chile said its output rose 7.6 percent in November.
But the shortages of refined metal have been made clear through falling inventories. LME copper stocks <MCUSTX-TOTAL> extended their decline on Tuesday to 366,425 tonnes, the lowest since January.
This has encouraged those looking for higher prices, including Jonathan Barratt, chief executive of commodity research firm Barratt's Bulletin in Sydney. "I wouldn't be surprised to see copper break out in the first quarter to $8,000 and $8,300."
Zinc, tin and lead along with platinum group metals could be bright spots for investors in 2014 amid another expected lacklustre year for commodities, analysts and fund managers said.
Zinc has been burdened by overproduction and high inventories, but the closure of major mines, including Century in Australia, is expected to tighten the equation.
Currently, however, supplies are largely available, evidenced by the inflow of 44,875 tonnes into LME warehouses, according to LME data on Tuesday. <MZNSTX-TOTAL>
Price movements on the London Metal Exchange on Tuesday were mainly book-squaring for the end of the year, Hamilton said.
Copper dipped 0.1 percent to $7,373 a tonne by 1023 GMT, hovering around a four-month peak, and aluminium fell by 0.4 percent to $1,814.50 after climbing to a near two-month high in the last session.
Copper climbed to $7,415.50 a tonne on Friday, its highest since Aug. 16. Economic optimism and expectations of a recovery in top consumer China have buoyed copper prices, which have gained 4.5 percent in December, the biggest monthly rise since September last year.
The most-traded March copper contract on the Shanghai Futures Exchange eased 0.1 percent to 52,280 yuan a tonne.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin
(Additional reporting by Naveen Thukral in Singapore; Editing by Dale Hudson)