October 17, 2012 / 10:44 PM / 5 years ago

UPDATE 1-Vale 3rd-qtr iron ore output down as China demand drops

* Iron ore output 83.9 mln tonnes in Q3 vs 87.9 mln year ago

* Iron ore prices fall to 3 year lows in Q3

* Nickel output fell 15.7 percent in Q3 vs year ago

RIO DE JANEIRO, Oct 17 (Reuters) - Brazilian mining company Vale SA said on Wednesday that its iron ore output fell 4.5 percent in the third quarter compared with a year earlier as demand and prices fell in China, its largest market.

Vale, the world’s second-largest mining company, said that compared with the second quarter iron output rose 4.2 percent.

The price of iron ore, the main ingredient in steel, fell to three-year lows in the quarter as the Chinese economy slowed, steel production slumped, and steelmakers used existing iron ore stock without replacing stock.

China is the biggest producer of steel. After oil, the iron ore market is the world’s second-biggest commodity market by value.

On Wednesday, Iron ore in the Chinese spot market rose 2.5 percent to $115.40 a tonne, its first gain in five days, according to Steel Intelligence.

Vale also said production of nickel, used to make steel rust resistant, fell 15.7 percent in the quarter to 49,000 tonnes from a year earlier. Nickel output was 19.8 percent lower than in the previous quarter.

Vale expects to become the world’s largest producer of nickel this year.

Output of metallurgical coal, used in the steelmaking process, rose 106.4 percent in the third quarter from a year ago, while thermal coal, used to generate electricity, rose 63.3 percent.

Output of copper, a reddish metal used for electrical and electronic equipment and in construction fell 20 percent in the third quarter.

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