By Anna Stablum

LONDON (Reuters) - Aluminium and copper touched fresh 3-year lows before recovering on bargain hunting on Friday, but another rise in warehouse stocks and concerns over future demand for industrial metals capped any major advances.

Markets bounced after European stock markets turned higher with mining shares taking the lead on Britain's main share index, the FTSE 100 <.FTSE and many mining companies were among the ten biggest gainers.

London-listed Antofagasta, Vedanta, Xstrata and BHP Billiton

rose by more than 10 percent.

"It was another day yesterday of very sharp falls for all of the base metals to levels that may now have attracted a little bit of buying," said analyst Gayle Berry at Barclays Capital.

Technical buying was taking advantage of the price dips.

"But from a fundamental perspective things still look very ugly for at least the next couple of quarters," Berry said.

Copper prices in London are down almost 10 percent so far this week on worries about demand, following weak housing data, problems in the auto sector, dismal jobs data and a slump in U.S. equities to their lowest in a decade.

Copper for three-months delivery on the London Metal Exchange fell to $3,375 per tonne, its lowest since July 2005 before trading at $3,500 by 1048 GMT compared to Thursday's close of $3,480. The metal fell around 3 percent on Thursday.

By looking at historical data the copper price could fall as far as $2,000 per tonne, said analyst Michael Widmer at BNP Paribas in a note.

"Production costs come with caveats. Yet, they can be a broad guideline for a bottom in metals quotations, as producers are unable to operate sustainably with negative margins," he said.

One of the main difficulties when looking at production costs is that they have come down together with a general fall in commodity prices, in particular energy costs for miners.

"Freight, energy and iron ore costs are falling, so production costs are like a moving target," said Berry, adding that as the components of those costs begin to fall so does the price floor for the various metals.

Inventories of copper, used widely in power and construction, are currently at 283,125 tonnes, having risen around 20 percent so far in November.

Stockpiles in Shanghai Futures Exchange warehouses fell 3,797 tonnes, or 18 percent, to 17,699 tonnes, more than expected, but not enough to offset rising stocks and a growing surplus in the international market.

The International Copper Study Group (ICSG) reported world refined copper market saw a surplus of 74,000 tonnes between January and August this year, versus a surplus of 22,000 tonnes in the year-ago period.