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Brazil's Vale pressures rivals with 2nd-qtr iron ore record

Reuters - UK Focus

(Adds analyst comment, detail on production levels,)

By Stephen Eisenhammer

RIO DE JANEIRO, July 23 (Reuters) - Brazilian mining company Vale SA said on Thursday it produced 85.3 million tonnes of iron ore in the second quarter, a record for the quarter and second-highest ever for the firm.

The numbers should quiet recent market chatter the world's largest producer of iron ore may be curbing plans to increase output after the iron ore price fell to some of its lowest levels in a decade.

Vale now looks on track to meet its 2015 iron ore production guidance of 340 million tonnes and preferred shares rose 2.5 percent in morning trade in Sao Paulo.

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With a production increase of 7.4 percent compared to the period last year, Vale keeps up the pressure on Australian rivals Rio Tinto (LSE: RIO.L - news) and BHP Billiton (NYSE: BBL - news) in the battle for market share in the global seaborne iron ore trade.

Iron ore, the main ingredient in steel, has moved from boom to bust in the past 18 months as massive new supply flooded the market at the same time as growth slows in the dominant consumer, China.

"This was generally a strong operating quarter from Vale with the company continuing to do a good job 'controlling what it can control,'" analysts at Citi wrote in a note to clients, adding the numbers could stoke further concern of oversupply in the market.

Vale reiterated it is cutting 25-30 million tonnes a year of low-quality iron ore on which the company is no longer making enough money. Vale did not give a time frame for the reduction in low-quality ore volumes but said it would be replaced by new, higher-quality production.

On top of its own production, Vale purchased 4.02 million tonnes of iron ore from third parties.

Despite strong performance in iron ore, Vale's production of nickel fell slightly short of analyst expectations at 67,100 tonnes, a fall of 3 percent compared to the first quarter but up 8.7 percent on last year. Coal production was 2.01 million tonnes, down 8.9 percent on the same period last year. (Additional Reporting by Jeb Blount, Editing by Franklin Paul and Nick Zieminski)