LONDON, June 19 (Reuters) - Copper prices bounced on Wednesday as focus switched to shortages and fund buying added momentum, but concerns about demand prospects in top consumer China were highlighted by rising inventories.

Benchmark copper on the London Metal Exchange (LME)was up 1.4% at $9,807 a metric ton at 0904 GMT. Prices of the industrial metal touched a two-month low of $9,551 on Tuesday as hopes of a growth recovery in China faded.

"The sell-off was quite steep, funds are reversing shorts and the Anglo news reminded people about the possibility of copper shortages," a metals trader said.

Anglo American said on Tuesday copper output at its Los Bronces mine in Chile is expected to fall nearly a third from average historical levels next year as it pauses a plant for maintenance, which could take a couple of years.

Expectations of shortages and the propect of strong demand in coming years drove LME copper to records above $11,100 in May. However, prices have since retreated due to uncertainty about the timing of interest rate cuts in the United States.

Lower U.S. rates would weigh on the U.S. currency, which when it falls makes dollar-priced metals cheaper for holders of other currencies, potentially boosting demand.

Weak demand in China can be seen in copper inventories in LME approved warehouses, mostly in Asia, which at 158,700 tons have climbed more than 50% since the middle of May.

The discount or contango for the cash over the three-month contract at a record high above $139 a ton on Tuesday also indicates surpluses of the metal used in the power and construction industries.

"The wide contango and lacklustre manufacturing demand don't feed into a narrative of refined supply being “tight” and instead suggests we could see further price erosion going into a seasonally weak summer, notwithstanding any mining issues," said Marex consultant Edward Meir.

In other metals, aluminium was up 1.1% at $2,513, zinc rose 1.1% to $2,868, lead climbed 2.1% $2,238, tin advanced 0.3% to $32,255 and nickel gained 0.5% to $17,380.

(Reporting by Pratima Desai; editing by Christina Fincher)