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METALS-Zinc hits two-week low as inventories rise and dollar firms

* LME/ShFE arb: http://bit.ly/2wZSAEz (Adds comments, updates prices, changes dateline from SYDNEY)

LONDON, Oct 17 (Reuters) - Zinc prices slipped to their lowest in more than two weeks on Tuesday as the dollar strengthened and available inventories rose, highlighting concern that increasing supply would ease shortages.

On-warrant zinc inventories on the London Metal Exchange -- metal not earmarked for delivery from warehouses and available for investors -- jumped by 17,850 tonnes, bringing the rise this month to 27 percent. <MZNSTX-TOTAL>

Zinc has gained 21 percent this year, touching its highest in a decade at $3,308.75 a tonne this month on concern about shortages, though these might soon be eased, analysts said.

"I think higher production should be on the cards in the short term because quite a few mining producers have flagged that they are going to increase output," said Commerzbank analyst Daniel Briesemann.

"I see the zinc price falling back below $3,000 within the next month, maybe in the next few weeks."

LME benchmark zinc fell 2.1 percent to $3,125.50 by 1020 GMT, the lowest level since Sept. 28.

* ZINC SPREADS: The premium of cash LME zinc over the three-month contract <CMZN0-3> fell to $34 a tonne from $59 the previous day and a peak of $91 on Oct. 12.

This suggested that metal may be delivered against short positions as the main October contract expires this week. A high premium also indicates that people are prepared to pay more to secure near-term scarce supplies.

* SHANGHAI CURBS: Also pressuring zinc were moves by the Shanghai Futures Exchange to limit the size of December future positions and adjusting fees.

* DOLLAR: The dollar strengthened to a one-week high against a basket of major currencies, weighing on the entire base metals complex. A stronger dollar makes metals more expensive for investors using other currencies.

* COPPER: LME three-month copper shed 0.9 percent to $7,068 a tonne, hit by profit-taking after its biggest daily jump in eight months on Monday. Prices struck $7,177 a tonne in the previous session, the highest since July 2014.

SCRAP: China could ban traders from importing scrap copper from the start of next year, a widely read industry website reported on Monday, as the world's top metals user deepens its crackdown on imports of foreign waste and cuts pollution from heavy industries.

* ALUMINIUM: LME aluminium bucked the weaker trend, adding 0.2 percent to $2,139.50 a tonne as China's campaign to reduce smog pollution and whittle down excess production is set to take about a tenth of its aluminium smelting capacity out of the market by the year-end.

* COMING UP: U.S. Industrial production for September at 1315 GMT

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(Reporting by Eric Onstad; Editing by David Goodman)