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GRAPHIC-Speculators feed on zinc famine

LONDON, Sept 27 (Reuters) - Scarce supplies, a surge in speculative interest and inventories at 8-year lows have driven zinc prices up by more than 20 percent this year to their highest in 10 years.

Benchmark zinc prices on the London Metal Exchange have more than doubled since January 2016, climbing above $3,000 a tonne last month for the first time since October 2007.

Closures of major mines such as Century in Australia and Lisheen in Ireland; suspensions of other operations, including some at Glencore; and healthy demand have left the market short of the metal used to rust-proof steel.

Consultants at CRU expect a 725,000 tonne deficit in refined zinc this year. That is about 5 percent of global demand estimated by analysts at around 15 million tonnes.

The scramble for metal has led to the largest annual drawdown in zinc stocks from LME-registered warehouses since 2006, which at 260,325 tonnes are down almost 40 percent since January and near the lowest since early 2009.

"Exchange stocks plus producer and consumer stocks are down to just below 6 weeks of global consumption outside China," said CRU analyst Ryan Cochrane.

The International Lead and Zinc Study Group estimates total global refined zinc stocks at 1.15 million tonnes.

Cochrane expects stocks to fall towards the critical four and a half week level of consumption early next year as seasonal tightness is made worse by a crackdown on polluting industries, including zinc smelting, in top consumer China.

The true availability of zinc on the LME market is even lower. Cancelled warrants - material earmarked for delivery - at 50 percent of total stocks reduce the amount of metal available to the market.

Imports of refined zinc by top consumer China of more than 77,000 tonnes in July are their highest since early last year, while stocks in Shanghai Futures Exchange warehouses at 67,225 tonnes are near their lowest since 2009.

Supply shortages are exacerbated by large holdings of LME stock warrants and cash contracts by one, sometimes two, companies in recent days. <0#LME-WHL> <0#LME-WHT> <0#LME-WHT>

The dearth of immediately available metal in LME warehouses pushed the premium for LME cash zinc over the three month contract to $66 a tonne this week, its highest in ten years. <MZN0-3>

The high premium should attract more metal onto exchanges.

"It will push people to ... maybe drop the material into exchange warehouses," said Macquarie analyst Vivienne Lloyd. "Prices should top out at $3,350-3,400."

Profit-taking by funds cutting bets on higher prices will also weigh on prices.

Rising supplies and weaker demand growth as high prices stimulate use of lower-cost alternatives to zinc will take the market back to near balance by 2019, according to CRU's Cochrane.

Higher prices have also boosted margins for zinc miners, he said, with supply of refined metal forecast to increase by 1.5 million tonnes to 14.7 million tonnes by 2021.

(Reporting by Peter Hobson; Editing by Pratima Desai and Mark Potter)