Two of the sources said London-listed miner Glencore was also delivering zinc to LME registered warehouses, but that the quantities are small. Reuters was not able to establish the exact amounts of zinc being delivered into the LME system by Trafigura and Glencore.

Trafigura and Glencore declined to comment in response to a request for comment.

"Trafigura is delivering (in Singapore) for rent deals," one of the sources said, adding that Glencore too had been sending zinc to LME warehouses in Singapore. "There's a lot more zinc waiting outside (the LME system)."

So-called "rent deals" are agreements under which LME warehouses share their fees or rental income with companies that deliver metal to them.

Weak demand for zinc - used to galvanise steel, particularly in top consumer China where the property slowdown has hit buying - makes rent deals possible, as less material is feeding through to consumers and more is in need of storage.

The firm that delivers the metal to a warehouse does not retain ownership under the rent deals, but still gets a share of the rent as long as the metal stays in the warehouse, and the fees are paid by the new owners of the metal.

After steady drawdowns in January, 41,150 tons of zinc have been delivered LME warehouses in Singapore since Feb. 1, taking the total to 198,275 tons on Friday. In November they reached their highest since 2003 at just over 200,000 tons.

Maximum rent LME warehouses can charge for zinc in Singapore is 53 U.S. cents a ton per day, which on 41,150 tons would yield around $21,800 a day in rental income.

Total zinc stocks in all LME locations on Friday amounted to 238,275 tons.

Visibility of surpluses is behind the climbing discount for the cash over the three-month contract at around $17 a ton compared with a $10 discount on Feb. 1.

Benchmark zinc prices on the LME fell to $2,278 a ton on Monday, the lowest since August last year.

(Reporting by Pratima Desai; Editing by Jan Harvey)

By Pratima Desai