METALS-Uncertainty over China, global growth hits prices, zinc volatile

* GRAPHIC-2019 asset returns: (Adds closing prices)

LONDON, March 15 (Reuters) - Most industrial metals prices fell on Friday as uncertainty about trade talks and global growth outweighed Chinese plans to use government levers to underpin growth.

News of a tax cut for China’s industrial sector sent zinc prices and spreads lurching in Shanghai.

Premier Li Keqiang promised broad policy steps to prevent a sharper slowdown for the world’s second-biggest economy, the biggest consumer of base metals.

“I think that has helped to stabilise the sentiment and calm the market, but there is still some macro uncertainty lingering, so we’re not seeing a massive rally in the metals prices,” said Xiao Fu, head of commodity market strategy at Bank of China International in London.

“Although the trade talks are progressing, we still don’t know the outcome and there’s some worry about the general weaker global GDP outlook.”

Benchmark aluminium on the London Metal Exchange fell into the red and shed 0.3 percent to $1,897 a tonne in closing open outcry activity. It earlier touched $1,914, the strongest since March 4.

* VAT CUT: Zinc prices fluctuated wildly and Shanghai Futures Exchange (ShFE) spreads ballooned after Li said a planned cut in value-added tax (VAT) on China’s manufacturing sector, which includes non-ferrous metals, would take effect from April 1.

Some speculators on the ShFE had previously bet that the planned cut in VAT would be implemented on May 1, increasing the backwardation on metals, including copper and aluminium.

* SHFE SPREADS: The backwardation between the March and April ShFE copper contracts spiked to over 1,000 yuan a tonne, the highest since May 2014, after Li’s comments. The spread between April and May, previously in a steep backwardation, immediately flipped into a deep contango.

* ZINC: LME zinc spiked 2 percent to $2,882 a tonne, the highest since July 2, immediately after Li’s comments, before profit-taking saw the metal used to galvanise steel drop 1.2 percent to close at $2,790 a tonne.

It still managed a 3 percent gain this week, its best week in six, as investors worry about tight stocks.

* LME ZINC BACKWARDATION: Low inventories and fears of production outrages has spurred a strong backwardation in LME zinc, Jinrui Futures said in a note. There was also a dominant position in LME zinc, with one participant controlling over 90 percent of available inventories, LME data showed. <0#LME-WHL>

The premium for cash zinc over the three-month LME contract CMZN0-3 stood at $45.15 on Friday, after it hit $55 a tonne a day earlier, the highest since early January.

* LME COPPER STOCKS: LME copper inventories MCUSTX-TOTAL have surged 67 percent over the past two days. LME copper finished 0.4 percent firmer at $6,432 a tonne.

* PRICES: LME nickel finished 0.4 percent firmer at $12,930 a tonne, lead slid 2.5 percent to $2,062 and tin fell 0.5 percent to $21,075.

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($1 = 6.7191 Chinese yuan)

Additional reporting by Enrico dela Cruz in MANILA and Tom Daly in BEIJING; editing by Louise Heavens