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SINGAPORE, May 9 (Reuters) Shanghai copper futures stormed to uncharted territory for a second straight day on Tuesday on strong demand and continued short-covering as market players caught up after a week-long holiday break.

The most active Shanghai contract July, rose 5 percent, or 3,500 yuan, from the previous settlement and close to 73,510 yuan ($9,166) a tonne before ending the morning session at 73,420 yuan.

The front-month May contract reached a record 73,620 yuan. The daily trading limit in Shanghai copper futures was extended to 5 percent after they closed up by the previous 4 percent trading limit on Monday.

''Although Shanghai copper futures hit the upper limit yesterday, the extent of the gain was still less than the gains on the LME,'' said Shen Haihua, vice president of Maike Futures in Shanghai. ''So it's a kind of catch-up.'' Shanghai spot copper prices were between 73,100 and 73,500 yuan, up 700 yuan on Tuesday.

London Metal Exchange copper prices had gained 9.3 percent to $7,655 last week when markets in China were closed for the week-long holidays.

Shanghai copper futures' gains on Tuesday helped push LME copper prices up toward their all-time high of $7,800 a tonne marked last Friday.

By 0352 GMT, LME copper for delivery in three months was at $7,645/$7,695 a tonne, against Monday's London close of $7,630.

An LME dealer in Shanghai said there was arbitrage interest -- buying LME copper and selling Shanghai copper.

''For September delivery, I think the LME copper price is cheaper than that in Shanghai futures,'' he said.

Copper, used in wiring, tubing and coins, has gained as much as 77 percent this year and has increased more than fivefold from 2001 on strong demand, especially from China and India, supply disruptions and speculative fund buying.

Last week, the world's largest diversified miner BHP Billiton , which produces copper and zinc, said prices were unlikely to fall until stocks rise from current low levels.

LME stocks of copper were 115,675 tonnes on Monday, equivalent to around two days of global consumption and down from just under 1 million tonnes in April 2002.

Robust global demand, labour unrest and supply disruptions at copper mines in Mexico and elsewhere lent support, while shortages of skilled labour and mining equipment were hampering producer efforts to bring on new capacity.

On the supply side, there has been little progress in talks to end a strike at Grupo Mexico's La Caridad copper mine after workers at the mine walked off the job on March 24.

Chemicals maker Engelhard said on Monday it will impose a copper surcharge for all copper-containing catalysts because of the recent surge in copper prices.

Shanghai's most active July aluminium futures closed the morning session down 50 yuan from the previous close at 22,030 yuan a tonne.

LME aluminium was at $2,900/$2,910 a tonne, against the previous London close of $2,928.

In other LME metals, zinc was at $3,375/$3,395 a tonne versus the London close of $3,390. Last Friday, it set a record $3,490.

Metal Prices by 0352 GMT LME ($/tonne), SFE (yuan/tonne) and COMEX (US cents/lb) Metal Last Net Change Pct Move LME Cu 7645.00 15.00 +0.20 SHFE Cu* 73420.00 3410.00 +4.87 LME Alum 2900.00 -28.00 -0.96 SHFE Alu* 22030.00 -50.00 -0.23 COMEX Cu** 361.00 0.45 +0.12 LME Zinc 3375.00 -15.00 -0.44 LME Nickel 19550.00 100.00 +0.51 LME Lead 1220.00 -10.00 -0.81 LME Tin 9250.00 -50.00 -0.54 Change so far in 2006 Metal Latest bid End prev year Pct Move LME Cu 7645.00 4395.00 +73.95 SHFE Cu* 73420.00 41720.00 +75.98 LME Alum 2900.00 2276.00 +27.42 SHFE Alu* 22030.00 19360.00 +13.79 COMEX Cu** 361.00 204.20 +76.79 LME Zinc 3375.00 1905.00 +77.17 LME Nickel 19550.00 13500.00 +44.81 LME Lead 1220.00 1051.00 +16.08 LME Tin 9250.00 6475.00 +42.86 * 3rd contract months for SHFE copper and aluminium.

** 1st contract month for COMEX copper.

($1=8.02 yuan) REUTERS CS GC1132