UPDATE 2-China zinc plants to resume output in quake-hit areas

(Recasts, adds comments, London prices)

By Polly Yam

SINGAPORE May 20 (Reuters) - Zinc smelters in earthquake-hit parts of China are slowly restarting production, providing some relief from supply worries and bringing down prices on the London Metal Exchange.

Nanfang Nonferrous Metals expects to restart zinc production at its 10,000 tonne-a-year smelter in Deyang city in China's Sichuan province within a week, while Hanzhong Bayi Zinc Industry had restarted more than 80 percent at its 120,000 tonne-a-year smelter in southern Shaanxi, according to sources at the plants.

Expected smelter restarts in China drove zinc prices down 1 percent to $2,260 a tonne in early London Metal Exchange trade MZN3 on Tuesday.

An analyst at state research group Antaike said up to 150,000 tonnes of closed capacity had been restarted as power supplies came back.

"We estimate about 350,000 tonnes of zinc smelting capacity in quake-hit areas remains closed," the analyst in Beijing said. The affected plants were in Sichuan and neighbouring Shaanxi and Gansu provinces.

The Antaike analyst said 150,000-200,000 tonnes of closed capacity had been seriously damaged and would take longer to resume operations. He did not provide a timeframe.

Antaike sees quake-related issues costing China 50,000 tonnes of zinc production this year.

The quake has killed 34,000 and the official death toll is expected to rise.

RESTARTS

Nanfang's zinc production facilities had not been damaged, but had been shut on lack of power supplies after the May 12 earthquake, a source at the firm's trading department told Reuters from Deyang.

The smelter is located in Deyang city, which is around 50 km (31.07 miles) from the epicentre of the earthquake in Sichuan province, and is also the home of Sichuan Hongda Co's (600331.SS) 100,000 tonne-a-year zinc operations, which stopped production after the quake.

In a statement on Tuesday, Hongda said 74 workers had died in the tremors and damage to its zinc and chemical operations would cost 387.7 million yuan ($55.62 million). The statement did not say when zinc operations would resume.

A trading manager at Hanzhong said the firm's smelter would be able to resume full production in June.

Hanzhong shut 70 percent of capacity at the smelter after the quake on safety concerns and reduced power supplies.

But zinc smelters were facing ore supply problems as most mines in the quake-hit areas had been closed on safety issues, a senior executive at Baiyin Nonferrous Metals said, adding the firm's 70,000 tonne-a-year lead and zinc mine in southern Gansu had been closed.

"Mines in the areas have been closed on fears of aftershocks. Local governments have asked people to leave," the executive said. "We do not know when mines are allowed to resume work. It could be days or weeks." ($1=6.970 Yuan) (Editing by Michael Urquhart)