LONDON, March 12 (Reuters) – Zinc futures jumped to a seven-month high on Tuesday, helped by a shortage of supply, reduced inventories on the London Metal Exchange (LME) and expected strong demand from China.

The LME index closed 3.7% higher at $2,838 per ton in three-month period, hitting a peak of $2,840 since July 3.

Zinc has risen by about 15% so far this year.

Miners have begun to increase production of zinc concentrates, but production is insufficient to meet demand, pushing zinc stocks in LME warehouses to their lowest level in more than 10 years, and boosting the water uptake of spot zinc in recent months.

“The supply of refined zinc is still very, very tight,” said Marcus Garvey, an analyst at ICBC Standard Bank. “It may not be until next year that the situation of excess supply of refined zinc will recur.”

He also said that the recent increase in the issuance of loans and local government bonds in China indicated that demand for metals would remain stable throughout the year.

LME zinc inventory fell to 59.2 million tons, the lowest since October 2007. Between 50% and 79% of warehouse receipts are held by an entity, and about a quarter of them have been cancelled.

Spot zinc rose sharply to a two-month high of $49.50 over the three-month period, reflecting the short-term supply shortage of LME.

The International Lead and Zinc Research Group (ILZSG) said on Monday that the global zinc shortage narrowed to 28,000 tons in January from 62,400 tons revised in December.

LME copper ended up 1% at $6,472 a tonne, close to a seven-month high of $6,540 hit on February 25.

The dollar weakened for the third consecutive day, making metal prices cheaper for buyers holding other currencies, helping to boost metal prices.

Futures aluminium closed up 1.4% at $1,873 per ton.

Nickel rose 1.6% to $13,100 per ton.

Lead rose 0.5% to $2,085 per ton.

Tin jumped 1.3% to $21,325 a ton.