CORRECTED - CORRECTED-UPDATE 1-Smaller China zinc smelters agree 10 pct outp

(Corrects company names to Shaoguan from Shoguan and Zhuzhou from Zhouzhou in paragraph 7, adds RICS for subsidiary and parent company) (Updates with details about reserves proposal, quotes)

By Alfred Cang

SHANGHAI, July 12 (Reuters) - China's small- and medium-sized zinc smelters, accounting for about 30-40 percent of output in the world's top producer, agreed on Saturday to cut production immediately by 10 percent to lift local prices, two industry sources told Reuters.

The smelters, including Henan Yuguang Gold and Lead Co Ltd (600531.SS) and Sichuan Hongda Co Ltd (600331.SS), also called on the government to establish a strategic reserve of the metal in order to help stabilise prices, as it does for other commodities like copper and wheat.

While the sources cited prices as the main motive for the curbs, the deal comes just two days after China's biggest aluminium smelters agreed to cut output by 5-10 percent to ease escalating electricity shortages that threaten to push the country into its worst summer power crisis since 2004.

"The smelters agreed to...try their best to support domestic prices," said one source with a smelter who attended the Saturday meeting in Shanghai, the third in a series of meetings aimed at reviving prices that have fallen by a third in four months, plunging many smelters into the red.

Speculation of production curbs helped drive Shanghai zinc futures prices up by their daily maximum 4 percent on Friday.

Third-month prices SZNc3 had touched 14,890 yuan a tonne on Wednesday, the lowest since zinc was introduced on the Shanghai Futures Exchange in March 2007 and below the 15,000 to 16,000 yuan that analysts say is smelters' break-even point.

The country's top zinc producers, like Zhuzhou Smelter Group Ltd (600961.SS), a subsidiary of Hunan Nonferrous Metals Corp (2626.HK), and Shaoguan, did not take part in the meeting as had been expected, the sources added.

China produces about a third of the world's refined zinc, a metal used mainly to galvanize steel.

Zinc is less energy-intensive to produce and a much smaller industry than aluminium, but faces similar power supply problems as Chinese generators curb electricity production due to soaring prices and low supplies of coal, their primary fuel.

Some smelters in China were already running at as low as 60 percent of capacity due to weak profit margins as prices fell.

The second source conceded that there was no system in place for monitoring compliance with the pact, however, leaving it up to individual smelters to determine how the implement the curbs.

RESERVES MOVE

"The second decision is that the smelters will call on the central government to launch a national policy on zinc reserves," said the source with a smelter.

Beijing runs similar reserves for other commodities and regularly buys and sells supplies in order to prevent prices from rising too high or falling too low.