UPDATE 1-Outokumpu ups capacity as orders recover

* Says will up capacity due to orders upturn

* Sees no recovery in underlying demand for stainless steel

* Says will not return to full production at this stage

* Share rise 2.7 pct

(Adds details, quotes, share price)

HELSINKI, June 25 (Reuters) - Finnish stainless steel maker Outokumpu (OUT1V.HE) said on Thursday it would increase its production capacity on the back of stronger order intake, but cautioned underlying demand for stainless steel remained weak.

"In the past weeks Outokumpu's order intake for stainless steel has increased somewhat from the earlier very low levels," the firm said in a statement.

Outokumpu shares were up 2.7 percent on the day at 12.75 euros at 0900 GMT.

Outokumpu said it would adjust production utilisation from a current 50-60 percent rate to allow for a recovery in fourth-quarter delivery volumes.

"The plan is however not to return to full production capacity at this stage," it said.

Outokumpu said inventories seemed to have been run down by distributors and end-users and that the increase in the nickel price had triggered some purchasing activity, but added it saw no signs of underlying demand for stainless steel picking up.

The firm said delivery volumes in the third quarter would remain at depressed levels due to capacity constraints and maintenance shutdowns. (Editing by Mike Nesbit)