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METALS-Copper, zinc fall on rising inventories, trade war fears

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

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LONDON, March 20 (Reuters) - Copper and zinc extended losses on Tuesday as rising inventories highlighted healthy supplies, while concern about trade wars and a stronger dollar also weighed on industrial metals markets.

London Metal Exchange zinc stocks have shot up by 60 percent this month and climbed by another 5,350 tonnes on Tuesday to 211,400 tonnes <MZNSTX-TOTAL>.

"We've been arguing for a while that mine supply in zinc had picked up strongly last year and that would start to seep through to a less tight refined market and perhaps we're seeing evidence of that," said Caroline Bain, chief commodities economist at Capital Economics.

"We've always suspected that there were stashes of metal being held off market and when the price was right they would become visible."

Bain said investors also worried that protectionism would lead to slower global growth.

Fears of a global trade war mounted after U.S. President Donald Trump imposed hefty import tariffs on steel and aluminium earlier this month and, according to sources in Washington, the United States is set to unveil new tariffs specifically targeting China by the end of this week.

LME benchmark zinc was down 0.5 percent to $3,244 a tonne by 1120 GMT.

* COPPER: Three-month LME copper on the LME shed 0.6 percent to $6,812 a tonne, marking the fourth session of losses and extending a 0.5 percent dip from the previous session.

* COPPER STOCKS: LME copper inventories <MCUSTX-TOTAL> grew by a further 3,200 tonnes to 322,475 tonnes, bringing the gain this year to 61 percent.

* ZAMBIA: Further highlighting growing supplies of the red metal, Zambia said it expects to produce more than one million tonnes of copper this year after revising its 2017 copper production upwards on the back of stable power supply.

* USD: The dollar index edged up as investors positioned themselves ahead of Wednesday's policy meeting at the U.S. Federal Reserve, which is widely expected to raise interest rates.

Higher U.S. rates may support a rising dollar, which would limit demand for dollar-denominated commodities such as copper from buyers paying with other currencies.

* ALUMINIUM: LME aluminium added 0.1 percent to $2,089.50 a tonnes after Japanese aluminium buyers agreed to pay producers premiums during the second quarter that are 25 percent higher than the first quarter, reflecting surging spot premiums in the United States.

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(Additional reporting by Tom Daly in Beijing Editing by Alexander Smith)