METALS-Zinc prices steady after plunge to 10-week low

(Recasts with updated prices)

LONDON, Nov 28 (Reuters) - Zinc prices steadied on Wednesday as falling stockpiles and rising premiums for nearby metal highlighted a short-term supply squeeze, halting a slide to 10-week lows.

Zinc, used to galvanize steel, had tumbled more than 7 percent from last Thursday's close as traders anticipated an increase in supply and weakening demand from steelmakers.

The benchmark contract on the London Metal Exchange (LME) fell to $2,393.50 a tonne on Wednesday, the lowest since Sept. 19, before recovering to $2,441 at 1500 GMT for a 0.2 percent gain.

"There's near-term refined market tightness but at the same time a very clear path towards softer conditions in 2019 given the significant build in concentrates inventories in China, improving smelter margins and a likely ramp up in production," said Deutsche Bank analyst Nick Snowdon.

"At the same time you see some softness in the galvanized steel sector," he said.

Prices could fall to the low $2,000s and remain there until supply tightens again in the early 2020s, he added.

SPREAD: The cash zinc premium over three-month metal, at $89.50, was heading back towards 10-year highs after easing earlier in the week, suggesting a shortage of immediately available metal. <MZN0-3>

STOCKS: Zinc inventories in LME-registered warehouses fell by 1,025 tonnes to a 10-year low of 120,250 tonnes. <MZNSTX-TOTAL>

WARRANTS: Exacerbating the squeeze, one entity was holding 50-79 percent of zinc warrants. One entity was also holding 50-79 percent of lead warrants. <0#LME-WHL>

ZINC POSITIONING: Speculative investors are beginning to ramp up bets on lower prices, with their net short expanding to 3 percent of open contracts, brokers Marex Spectron said.

TRADE DISPUTE: U.S. President Donald Trump and Chinese leader Xi Jinping are due to meet at this weekend's G20 summit.

Trump's economic adviser said the U.S. President was open to reaching a deal on trade but is ready to increase tariffs if there is no breakthrough.

China's ambassador to Washington said Beijing hoped for a deal and warned of dire consequences if U.S. hardliners tried to separate the world's two largest economies.

Fears that tariffs will damage the economy in China, the world's biggest metals consumer, have helped push industrial metals prices sharply lower.

CHINA FACTORIES: Chinese factories are expected to have increased output for a second month running in November, a Reuters poll showed.

CHILE STRIKE: The union at BHP's Spence mine in Chile, which produced 198,600 tonnes of copper last year, said workers had started a strike after layoffs.

OTHER METALS: LME copper was up 1 percent at $6,185 a tonne, aluminum was down 0.2 percent at $1,926, nickel gained 0.4 percent to $10,820, lead rose 1.4 percent to $1,936.50 and tin was up 0.1 percent at $18,285.

(Additional reporting by Mai Nguyen Editing by David Goodman)