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METALS-Zinc prices rally for second day; tight stocks in focus

(Adds comment, details and updates prices) BEIJING, May 28 (Reuters) - Zinc prices rose for a second session in London and Shanghai on Tuesday, extending a recovery from an earlier sell-off as investors worried about low inventory levels for the metal used to galvanize steel. Shanghai Futures Exchange zinc stocks <ZN-STX-SGH> dived by 18.1% from the previous week to 56,320 tonnes, according to data released by the bourse on Friday. LME zinc inventories <MZN-STOCKS> dipped for five straight sessions last week and stood at 102,600 tonnes. "I think it's a rebound from overselling," Xu Maili, head of non-ferrous metals research at Everbright Futures in Shanghai, said of zinc's gain. ShFE zinc shed 4% last week in a broad-base metals sell-off driven by the Sino-U.S. trade tensions. ShFE copper, up 0.2% by midday on Tuesday, has now climbed for three straight days, Xu noted. "Zinc was slower to rebound, so the magnitude is bigger," he added. The London Metal Exchange reopened on Tuesday after the Spring bank holiday in the United Kingdom on Monday, which was also the Memorial Day holiday in the United States.

FUNDAMENTALS

* ZINC: Three-month LME zinc rose as much as 1.5% to $2,599 a tonne and stood at $2,584.50, as of 0410 GMT. The most-traded July zinc contract on the ShFE climbed as much as 2.4% to 20,795 yuan ($3,014.95) a tonne and ended the morning on 20,720 yuan.

* ZINC SPREADS: The premium of cash LME zinc over the three-month contract <CMZN0-3> hit $161 a tonne on Friday, the highest in 22 years, indicating tight near-term supply.

* SHFE: The Shanghai Futures Exchange (ShFE) is exploring ways to open up its non-ferrous metals futures contracts to foreign investors and has a rough timeline to give access within two years, its chairman said on Tuesday.

* COPPER: LME copper rose 0.9% to $6,010 a tonne before easing back to $5,993 a tonne. ShFE copper edged up 0.2% to 47,260 yuan a tonne.

* COPPER: The head of state-run miner Codelco, the world's largest copper producer, said Chile's mining industry was increasingly held back by new environmental regulations and the low productivity of Chilean workers, local daily La Tercera reported on Monday.

* COPPER: China's Yanggu Xiangguang Copper Co has restarted its 400,000 tonne per year copper smelter in Shandong province after an overhaul that lasted about 50 days, a company official said on Monday.

MARKETS NEWS

* Asian shares tracked European gains, as relief over EU election results eased concerns about political difficulties in the bloc.

PRICES

BASE METALS PRICES 0416 GMTThree month LME copper 5993Most active ShFE copper 47240Three month LME aluminum 1804Most active ShFE aluminum 14235Three month LME zinc 2581.5Most active ShFE zinc 20715Three month LME lead 1814Most active ShFE lead 15990Three month LME nickel 12340Most active ShFE nickel 100430Three month LME tin 19400Most active ShFE tin 145790LME/SHFE COPPER LMESHFCUc3 478.62LME/SHFE ALUMINIUM LMESHFALc3 121.25LME/SHFE ZINC LMESHFZNc3 -69.23LME/SHFE LEAD LMESHFPBc3 1332.77LME/SHFE NICKEL LMESHFNIc3 1916.14

($1 = 6.8973 Chinese yuan)

(Reporting by Tom Daly; Editing by Rashmi Aich and Sherry Jacob-Phillips)