Copper prices fell in London on Thursday as rising inventories signalled an oversupplied market, caused by strong production and fragile demand recovery in China.

Three-month copper on the London Metal Exchange (LME) was down 0.2% at $9,882.50 per metric ton by 0648 GMT, and the most-traded August copper contract on the Shanghai Futures Exchange (SHFE) was nearly flat at 79,890 yuan ($10,986.43) a ton.

LME copper inventories were last at 195,475 tons, the highest since October 2021. Stocks rose the most in warehouses in South Korea and Taiwan, the closest delivery locations for exports from China, usually a net importer.

The LME cash copper contract traded at a $161.41 a ton discount to the three-month contract on Wednesday, the biggest discount since at least 1982, signalling abundant supply in the near term.

"There's no demand from China yet, so there's no cash pricing," said a trader, adding that the flat physical premium indicated weak appetite to import the metal into its biggest consuming market.

The weak demand is also evidenced by recent disappointing economic data from China. However, this has also led to hopes that Beijing will announce more economic stimulus at a key political meeting from July 15-18.

"The prospect of easing monetary policy (in China) boosted sentiment in the base metals sector. However, signs of weak demand limited the gains," ANZ analysts said in a note.

Nickel inventories also climbed in LME warehouses and were last at 98,088 tons, the highest since January 2022, due to rising production in Indonesia and sluggish consumption.

Tin stockpiles in LME warehouses, however, fell to 4,450 tons, the lowest since April 23, due to lower supply from Indonesia.

LME aluminium eased 0.1% to $2,482 a ton, zinc advanced 0.4% to $2,976, lead climbed 0.3% to $2,187, tin was almost flat at $35,010 while nickel eased 0.2% to $16,865.

SHFE aluminium dipped 0.3% to 20,195 yuan a ton, nickel dropped 1.2% to 133,660 yuan, while zinc rose 1.1% to 24,500 yuan, lead increased 0.3% to 19,530 yuan and tin jumped 1.6% to 282,530 yuan.

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($1 = 7.2717 yuan)

(Reporting by Mai Nguyen in Hanoi; Editing by Eileen Soreng and Sonia Cheema)