By Anna Stablum July 22 (Bloomberg) -- Copper led declines in London as rising inventories and signs of contraction in Europe revived speculation that demand for industrial metals may slow. Inventories of copper in warehouses monitored by the London Metal Exchange rose 2,075 metric tons to 268,500 tons, the fourth consecutive gain, the exchange said in a daily report today. European industrial orders declined 30 percent in May, the European Union’s statistics office in Luxembourg said today. Copper had climbed 11 percent since July 10. “Fundamentally the market has run ahead of itself,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e-mail. Prices should fall, he said, pointing to rising inventories in LME warehouses. Copper for three-month delivery dropped $49.75, or 0.9 percent, to $5,350.25 a ton as of 10:55 a.m. on the LME. Copper futures for September delivery declined 0.6 percent to $2.437 a pound on the Comex division of the New York Mercantile Exchange. Copper has jumped 74 percent this year, aided by record imports from China, the world’s largest consumer of the metal. China imported 378,943 tons of refined copper last month, a 12 percent increase from May and the fifth straight record, customs office data showed today. The LME copper market moved into “backwardation” last week for the first time since May 1 as metal for nearby delivery traded at a premium to three-month copper, signaling scarce supplies. That situation disappeared this week as the contract closest to delivery was $13.25 a ton lower than the three-month contract yesterday. Aluminum Demand ‘Weak’ Norsk Hydro ASA, Europe’s third-largest aluminum producer, said demand for the metal used in construction and transport is still “weak” and prices will likely remain “low.” Aluminum prices have risen 11 percent this year, after shedding 36 percent in 2008. Global demand excluding China may shrink by 15 to 20 percent this year, from consumption of 25 million tons last year, Hydro said in a statement today. Aluminum for delivery in three months fell $1 to $1,714 a ton. European premiums paid for aluminum are expanding because stockpiles in warehouses are tied to financing deals, curbing supply, CRU Group said. The fee, added to the price of metal for immediate delivery on the LME rose to a 10-month high of about $65 a ton for deliveries into Rotterdam warehouses, Massimo Rossi, an analyst at the research group CRU in London, said yesterday. The premium was $55 about a month ago, Rossi said. Aluminum stockpiles monitored by the LME rose 125 tons to a record 4.6 million tons. The price of metal for immediate delivery is $28 a ton cheaper than the three-month contract, compared with $38.50 a ton on March 25. Higher prices on the exchange and the increase in premiums may now make it less attractive for producers to lock inventories into financing deals, Rossi said. Among other LME metals for delivery in three months, tin dropped 1.3 percent to $13,800 a ton, nickel fell 1.4 percent to $15,730 a ton, lead declined 1.1 percent to $1,670 a ton and zinc fell 1 percent to $1,639 a ton. To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net

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