METALS-Zinc hits 10-year high for second day on China output woes

* Zinc surges to highest since Aug 2007 at $3,267.50/T

* GRAPHIC-2017 asset returns: http://tmsnrt.rs/2jvdmXl

* LME/ShFE arb: http://bit.ly/2wZSAEz (Updates throughout, adds LONDON dateline)

LONDON, Oct 3 (Reuters) - Zinc hit 10-year highs for a second day on Tuesday, reversing earlier losses, as worries over production outages in China pushed up prices, while London Metal Exchange inventories posted another decline.

Prices of the grey metal used in galvanizing steel rose for a fourth straight session as speculators bet environmental inspections would hit output in China.

"It does sound as though the authorities in China are quite serious about this anti-pollution drive," Capital Economics analyst Caroline Bain said.

"(Zinc) is definitely, of the base metals, one of the tightest," she said. "We saw China's imports of refined metal go up strongly in the last two months, and its production of refined metal has fallen slightly so far this year."

* ZINC PRICES: Three-month zinc on the London Metal Exchange was up 0.7 percent at $3,259.50 a tonne by 1030 GMT, having earlier touched its highest since August 2007 at $3,267.50 a tonne.

* CHINA SHUTDOWNS: About 60 percent of lead-zinc mines were undergoing month-long shutdowns during environment inspections in Sichuan province.

* ZINC STOCKS: LME zinc inventories <MZNSTX-TOTAL> fell by another 1,025 tonnes, data on Tuesday showed, bringing the decline so far this year to 64 percent. One party controlled 50-80 percent of those stocks <0#LME-WHL>, LME data showed.

* COPPER PRICES: Three-month copper on the London Metal Exchange was up 0.1 percent to $6,502 a tonne, extending gains for a second session after it fell nearly 5 percent in September from an early three-year high.

* TECHNICAL INDICATORS: A break above resistance at $6,514 in LME copper could signal an extension of the bounce from the metal's Sept. 22 low of $6,366, Reuters technical analyst Wang Tao said in a report on Tuesday.

* FINANCIAL MARKETS: World stocks hit their latest in a run of record highs on Tuesday, while the dollar was at it highest in six weeks, lifted by a combination of encouraging U.S. data and rising global bond yields.

* NICKEL: LME nickel was the biggest mover among the industrial metals, up 2.8 percent at $10,680 a tonne after falling more than 1 percent in the previous session.

* TIN STOCKS: Tin stocks held in LME warehouses <MSNSTX-TOTAL>, which have fallen 45 percent this year, declined by another 25 tonnes on Monday, exchange data showed. One party controlled 80-90 percent of those stocks <0#LME-WHL>.

* OTHER METALS: LME tin was up 0.1 percent at $20,700 a tonne, while aluminum was up 1.2 percent at $2,125.50 a tonne and lead was 0.2 percent higher at $2,524 a tonne.

(Additional reporting by James Regan in Sydney; editing by Mark Heinrich)