By Glenys Sim May 21 (Bloomberg) -- Copper in London rebounded as its drop to a three-month low yesterday increased its discount to Shanghai prices, encouraging purchases by Chinese traders. Copper for three-month delivery on the London Metal Exchange gained as much as 0.5 percent to $6,640.50 a metric ton, and traded at $6,620 at 12:09 p.m. in Singapore, after falling as much as 1.3 percent earlier. August copper on the Shanghai Futures Exchange lost as much as 2.3 percent to 52,750 yuan ($7,726) a ton, and was at 53,680 yuan at the midday break. Futures in London are trading at a discount to Chinese contracts after declining 10.8 percent this month, compared with a 8.6 percent drop in Shanghai. Arbitrage traders profit from buying the metal in London and selling it in Shanghai to take advantage of the price disparity. “Demand is steady in China so there’s a lot of buying interest whenever the arbitrage window opens,” Liu Xu, an analyst at China International Futures Co., said from Shenzhen today. “This should give some support to prices, which have been hit hard by concerns about Europe’s debt crisis and the possibility of slowing growth in China.” Copper, often used as a gauge of economic activity, is still set to drop for a sixth week, the longest period of declines since August 2008. The metal has slumped 3.9 percent this week on concern the European debt crisis may derail the global economic recovery, dimming prospects for metals demand. Metals also tumbled after sales of new homes in Shanghai slowed to a five-year low last week, raising concern that property demand will continue to slide after China increased minimum mortgage rates, restricted pre-sales by developers and tightened controls on purchases of second and third properties. Aluminum in London was little changed at $1,991.50 a ton after falling as much as 0.9 percent earlier. Zinc gained 0.3 percent to $1,880.25 a ton, lead rose 0.7 percent to $1,757 a ton, nickel added 0.4 percent to $21,275 a ton, while tin hadn’t traded by 12:13 p.m. in Singapore. To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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