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METALS-Mounting LME inventories undermine zinc prices

* LME/ShFE arb: http://bit.ly/2wZSAEz

* LME zinc stocks up nearly 60 pct since March 3

* Nickel hits two-week high above $14,000/T (Recasts, adds comment, changes dateline from MELBOURNE)

LONDON, March 14 (Reuters) - Zinc prices slipped on Wednesday as inventories in London Metal Exchange-approved warehouses climbed, but support came from expectations of stronger demand in top consumer China.

Benchmark zinc on the LME was down 0.3 percent at $3,275 a tonne at 1031 GMT. Prices of the metal used to galvanize steel are down more than 8 percent since hitting $3,595.50 on Feb. 15, their highest level since July 2007.

"There is a shortage of galvanized steel in China. There should be a big restock in the second quarter," said Macquarie analyst Vivienne Lloyd, adding that the zinc market this year would see a 500,000-tonne deficit.

"China's steel industry was impacted by the winter cuts, production was weak and some operations had to close."

STOCKS: Stocks of zinc in LME warehouses have jumped nearly 60 percent since March 3 to 207,775 tonnes. Canceled warrants - material earmarked for delivery and so not available to the market - account for about 8 percent of stocks, down from nearly 50 percent at the start of March. <MZNSTX-TOTAL>

CHINA: The country accounts for about half of global zinc demand, estimated at 14.4 million tonnes.

SPREAD: Greater availability of zinc on the LME market has seen the premium for the cash contract over the three-month forward - above $55 a tonne at the end of January - slide into a discount around $3.5 a tonne. <MZN0-3>

MINERS: "Higher zinc prices have helped miners' profit margins, and this should work as an incentive to miners to speed up their pipeline of projects or restart idled operations," GFMS analysts said in a note.

"However, it is 'too little, too late' to fill the concentrate supply gap that we forecast in 2018."

CONCENTRATE: Traders are watching treatment charges for zinc concentrate. Sliding treatment charges suggest less availability of concentrate, while a rising number would mean surpluses.

NICKEL: The stainless steel ingredient gained 0.6 percent to $13,965. It earlier hit a two-week high at $14,020.

NICKEL STOCKS: Concern about shortages on the LME market have been fanned by a 10 percent fall in stocks since Jan. 10 to 325,434 tonnes and canceled warrants rising to 39 percent from 30 percent. <MNISTX-TOTAL>

OVERALL: Strong industrial output data from China, suggesting the economy may be picking up momentum, helped boost prices of industrial metals.

PRICES: Copper gained 0.9 percent to $7,009 a tonne, aluminum added 0.8 percent to $2,119, lead rose 1.8 percent to $2,433 and tin was up 0.4 percent at $21,250.

(Editing by Dale Hudson)