(Adds analyst comment, updates prices, adds LONDON dateline)
LONDON, Feb 10 (Reuters) - Zinc prices lurched on Monday to the lowest since July 2016 after a surge in inventories and due to worries about demand in China as cases of the coronavirus climb.
Zinc stocks in warehouses certified by the London Metal Exchange hit the lowest in nearly three decades last week, but analysts said this was deceptive since there was a lot of metal being held in other depots.
Annual contract negotiations had constrained metal flows but those have now been concluded, said Oliver Nugent, an analyst at Citigroup in London.
"Metal that was being held back before contract negotiations were finished is now coming on the market and combining with weakness in Chinese import orders, that's putting pressure on LME prices," he said.
Three month LME zinc slid to $2,126 a tonne, the lowest since July 8, 2016, and was down 0.8% at $2,129 by 1115 GMT.
Nearly 100 more people died from the coronavirus as the death toll rose to 908 and the World Health Organization said the number of cases outside China could be just "the tip of the iceberg".
Citibank has become more cautious about the impact of the virus on demand in China, the world top consumer of metals, Nugent said.
"If you tally up the provinces that so far show the largest amount of cases, the potential demand hit is really quite severe. We calculate that the seven worst provinces have about 40% of GDP, 40% of property new starts and 70% of air conditioner production."
Air conditioning units require large amounts of copper.
* ZINC STOCKS: LME zinc inventories <MZNSTX-TOTAL> shot up on Monday to 71,150 tonnes, the highest since August last year, bringing the gains over the past week to 43%.
* ZINC SPREAD: The discount of cash LME zinc to the three month contract <CMZN0-3> rose to $4.50 a tonne, the highest since last August and compared to a premium of $23.75 about three weeks ago. This indicates a rise in supplies of metal in the LME system.
* COPPER: LME copper rose 0.3% to $5,678.50 a tonne, but Nugent expects more losses. Citibank expects copper to touch a low of $5,300 during the first quarter before recovering later in the year.
* CHINA: China's factory-gate prices snapped six months of year-on-year declines in January, although prolonged business closures from the virus outbreak mean positive momentum is unlikely to persist.
* TIN: Indonesia's state miner PT Timah plans to increase its 2020 refined tin output by 5% annually, a senior official said.
* PRICES: LME aluminium fell 1.1% to $1,707 a tonne, nickel rose 1.6% to $12,980, lead shed 0.8% to $1,803, while tin advanced 1.7% to $16,450.
* For the top stories in metals and other news, click or (Reporting by Eric Onstad; Editing by Mark Potter)