Benchmark zinc on the London Metal Exchange traded down 0.1 percent at $2,773.5 a tonne in official rings. Earlier prices of the metal used to galvanise steel touched $2,797.50 a tonne, its highest July 4.

"People are concerned about refined metal production and inventories," said BMO Capital Markets analyst Kash Kamal.

"What happens next will depend on whether post-winter shutdowns in China, steel producers start to restock and we see increasing refining activity."

OUTPUT: China's zinc output came in at 4.53 million tonnes in 2018, according to a survey of smelters by Antaike. That marked a fall of 4.6 percent, or 218,000 tonnes, from 2017, the steepest drop since 2013.

PERFORMANCE: Zinc was the worst performer in the base metals complex in 2018, reporting a 25.7 percent drop on concerns of oversupply. It is up nearly 13 percent so far this year.

BALANCE: Analysts expect to see a balanced zinc market this year as mine supply grows to meet demand estimated this year at around 14 million tonnes.

INVENTORIES: Stocks of zinc at 112,500 tonnes are less than half the levels seen last August. Also worrying the market are cancelled warrants -- metal earmarked for delivery - at nearly 50 percent of total stocks.

HOLDINGS: Concern about nearby zinc supplies has been fuelled by one company holding between 50 and 79 percent of LME zinc warrants and cash contracts.

VOLUMES: Volumes are expected to be subdued this week due to the Lunar New Year holiday in China, which accounts for around half of global demand for industrial metals.

TRADE: US President Donald Trump said last week he will meet Chinese President Xi Jinping soon to try to seal a comprehensive trade deal as Trump and his trade negotiator both cited substantial progress in two days of talks.

Many have taken to this to mean the dispute between the world's two largest economies could soon be resolved.

But Commerzbank analyst Eugen Weinberg disagreed. "I don't see the trade war coming to an end soon and China growth is slowing. After the Chinese holiday we could see more downside for base metals," he said.

DOLLAR: A firmer US currency, which makes dollar-denominated commodities more expensive for holders of other currencies was weighing on prices of industrial metals.

PRICES: Copper was down 0.6 percent at $6,103, aluminium fell 0.7 percent to $1,870, lead slipped 0.7 percent to $2,113, tin ceded 0.4 percent to $20,815 and nickel gained 0.6 percent to $12,740.