* LME zinc stocks fall 61% over past 12 months
* China allows further copper scrap imports (Adds analyst comments on nickel, updates prices)
LONDON, Jan 8 (Reuters) - Zinc prices hit the highest in more than seven weeks on Wednesday as fears of further Iran-U.S. military escalation eased, while concerns about short-term supplies of the metal, mainly used for galvanising steel, increased.
Selling on stock markets paused on hopes that the United States would stop short of strong retaliation for Iran's attack on U.S.-led forces in Iraq.
"There's a slightly muted reaction in the oil market as well with the sense that after the Iranian attacks, there's been a line drawn under their dispute," said Kieran Clancy, assistant commodities economist at Capital Economics in London.
While he was largely bearish about zinc prices in 2020 due to higher supply expected to weigh on the market, Clancy said there were still some bottlenecks at smelters that was keeping the market relatively tight.
"There are still some issues being faced. I don't think it's with China's refined capacity, but elsewhere there are still some teething problems."
Three month zinc was the top performer on the London Metal Exchange, gaining 2.2% to $2,397 a tonne by 1500 GMT, the highest since Nov. 15.
* ZINC STOCKS: Zinc inventories in LME-registered warehouses <MZNSTX-TOTAL> have tumbled by 61% over the past 12 months to 50,175 tonnes, the lowest since Nov. 8, according to LME data.
* ZINC SPREAD: The premium of cash LME zinc over the three month contract <CMZN0-3> rose to $16.50 a tonne, the highest in more than a month, indicating tighter near-term supplies in the LME system.
* COPPER: LME copper added 0.4% to $6,176 a tonne, recovering after earlier sinking into the red when news emerged of the Iranian strikes.
* COPPER: The copper price is unlikely to rebound in 2020 even if Sino-U.S. trade tensions subside, the head of Chile mining trade union Sonami said.
* SCRAP: A unit of China's environment ministry on Wednesday issued import quotas for another 26,566 tonnes of high-grade copper scrap, in the second batch of allowances for restricted types of scrap metal for 2020.
* NICKEL OUTLOOK: Analyst Paul Gait at Bernstein said that an ore export ban by Indonesia is unlikely to have an immediate impact on the nickel market due to inventories held by refiners. "So, the deficit is more likely to manifest itself in 2021 or later, rather than in 2020," he said in a note.
* PRICES: LME aluminium slipped 0.9% to $1,799.50 a tonne, nickel gained 1.2% to $14,105, lead climbed 1% to $1,926.50 and tin rose 0.2% to $17,040. (Additional reporting by Tom Daly in Beijing, editing by Louise Heavens and Jane Merriman)