METALS-Zinc outperforms on supply worries, copper firm

* Shanghai zinc hits 18-month top, LME up over 2 pct

* Zinc prices lifted by worries on possible output cuts

* Copper hovering near 14-month peaks

* Shanghai copper stocks at new 5-½ year high (Adds Shanghai inventories, updates prices)

MANILA, Nov 20 - Shanghai zinc futures hit their highest level in 18 months on Friday and LME prices jumped more than 2 percent, outpacing gains in other base metals, on supply concerns.

Australia's Century zinc mine, which produces a third of the country's zinc output, was due to run out of concentrate at its shipping port earlier this week, prompting buyers to look for alternative sources.

A potential squeeze in zinc concentrate supply and higher power costs in China may force some smelters to cut production, said a trader in Singapore.

China will raise power prices for non-residential users by around 5.4 percent from Friday, the first increase since July 2008, to compensate grid firms that lost out from a state cap on prices.

Analysts estimated the power tariff increase would lift production cost for zinc smelters by 100 yuan per tonne, for aluminium by about 400 yuan, and for copper by around 20 yuan.

Third month Shanghai zinc closed up 100 yuan at 17,970 yuan ($2,631) a tonne, after hitting a session high of 18,120 yuan, its loftiest since late May 2008.

Volume traded in Shanghai zinc futures was 352,804 lots, heavier than the 198,206 lots traded in copper.

On the London Metal Exchange, three-month zinc rose $30 to $2,245 a tonne at 0810 GMT, after rising as high as $2,274 earlier.

Zinc is up 3.3 percent in London this week, its best weekly gain in four weeks, although its 86 percent rise so far this year is still dwarfed by copper's gain of more than 120 percent.

RISING STOCKS

LME copper rose $42 to $6,832 a tonne and Shanghai copper added 150 yuan to end at 53,690 yuan per tonne, not far off 14-month peaks they hit earlier in the week.

Copper is up around 5 percent this week, also its best performance in a month.

Heavy snow in China over the past week is also supporting base metals prices, defying a firmer dollar.

"Everybody in China is trying to double their stocks, be it fuel or metals, and the scrap supply for most base metals still has not come up to the normal level because industrial production is still lagging," said the Singapore-based trader.

But some analysts believe prices have run farther than fundamentals can justify, pointing to rising metals inventories and patchy global economic data.

"Should the macro numbers out over the next several weeks continue to come in on the weaker side, markets will have to focus on the possibility of a double-dip recession, in which case many of the high flying commodity complexes could correct rather sharply and finally decouple from the weaker dollar," MF Global analyst Edward Meir said in a note.

Weekly Shanghai copper inventories jumped another 2,466 tonnes to 107,405 tonnes, a new five and a half year high, according to exchange data released on Friday.

LME copper stocks rose 6,450 tonnes to 420,550 tonnes on Thursday, the highest since April 24.

LME zinc stocks are at four-year highs, nickel inventories are at 15-year highs and aluminium stocks are at near record levels. Base metals prices at 0810 GMT Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 6832.00 42.00 +0.62 3060.00 123.27 SHFE Cu* 53690.00 150.00 +0.28 23840.00 125.21 LME Alum 2025.00 -6.00 -0.30 1535.00 31.92 SHFE Alum* 15650.00 45.00 +0.29 11540.00 35.62 COMEX Cu** 307.80 0.00 +0.00 139.50 120.65 LME Zinc 2245.00 30.00 +1.35 1208.00 85.84 SHFE Zinc 17970.00 100.00 +0.56 10120.00 77.57 LME Nickel 17000.00 25.00 +0.15 11700.00 45.30 LME Lead 2343.00 11.00 +0.47 999.00 134.53 LME Tin 14725.00 -135.00 -0.91 10700.00 37.62 LME/Shanghai arb^ 881 Dollar/yuan 6.8270 \ 6.8280 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month