METALS-Tumbling inventories push zinc to three-month highs

* LME/ShFE arb: http://tmsnrt.rs/2oQ5nm2

* Cash aluminum discount over 3-mth widens

* New mines to boost zinc supplies by 2019 - analysts

* Coming up: Fed's Janet Yellen speaks at 1400 (Adds closing prices)

LONDON, July 12 (Reuters) - Zinc prices climbed to their highest in more than three months on Wednesday as the market worried about falling stocks in exchange warehouses, shortages and expectations of stronger demand from top consumer China.

Benchmark zinc ended up 0.4 percent at $2,833 a tonne. Earlier, prices of the metal used to galvanize steel touched $2,874.50, the highest since March 30.

"We've had a large drawdown in stocks. Investors have turned positive on industrial metals since China's June manufacturing PMI came out," Capital Economics analyst Caroline Bain said.

"We expect a 185,000 tonne deficit this year and a balanced market next year ... There are signs supply will improve."

INVENTORIES: Stocks of zinc in LME warehouses at 273,675 are down more 35 percent since the start of the year. A tight market is exacerbated by canceled warrants - metal earmarked for delivery - at nearly 75 percent. <MZNSTX-TOTAL>

SPREADS: Worries about supplies on the LME market are highlighted by the discount for cash over the 3-month forward, which has narrowed to near zero from around $20 a tonne in mid-June. <MZN0-3>

SHANGHAI STOCKS: Zinc inventories in warehouses monitored by the Shanghai Futures Exchange have plummeted more than 50 percent to below 67,000 tonnes since January. <ZN-STX-SGH>

DEMAND: China accounts for nearly half of global demand estimated at around 15 million tonnes this year.

DEFICIT: the International Lead and Zinc Study Group (ILZSG) said in April the zinc market was expected to see a deficit of 226,000 tonnes this year.

FUTURE SUPPLY: "New large mines in Australia and South Africa will add 460,000 tonnes of supply by 2019," Liberum analysts said in a note. "Slowing Chinese credit growth should bring implied steel demand back into negative territory. Zinc consumption should come under similar pressure given the high correlation."

CHINA: China's manufacturing engine cranked up in June, expanding at the fastest pace in three months, as new orders and production rose in a sign of a modest recovery.

ALUMINIUM: Expectations of higher supplies to come to the LME market have seen the discount for cash over the three-month contract widen to above $16 a tonne, the highest since February, from near $4 a tonne at the end of June. <MAL0-3>

ALUMINIUM STOCKS: Latest LME data shows stocks rose 14,875 tonnes to above 1.39 million tonnes <MALSTX-TOTAL>. Three-month aluminum slid 0.6 percent lower at $1,889.

ALCOA: Weighing on aluminum was news that Alcoa would partially restart its Warrick smelter in Indiana.

CHINA DATA: Industrial metals were also boosted by Chinese banks extending more credit than expected in June.

PRICES: Copper closed 0.5 percent higher at $5,905 a tonne, lead gained 0.9 percent to $2,327, tin rose 0.6 percent to $19,900 and nickel added 0.9 percent to $9,210 a tonne.

(Editing by Jane Merriman and David Evans)