UPDATE 1-Brazil's Vale iron ore output hits 2nd-qtr record

(Adds pellet production, reason for rise)

RIO DE JANEIRO, July 20 (Reuters) - Brazil's Vale SA , hit record iron ore production in the second quarter, even as the world's largest iron ore producer said output would close the year near the bottom of its 360 million to 380 million tonne forecast.

Vale said iron ore production reached 91.849 million tonnes last quarter, up 5.8 percent from 86.823 million tonnes in the second quarter of 2016. Pellet production rose 21.5 percent to 12.2 million tonnes last quarter from the same period last year.

Iron ore output was spurred by record production of 41.5 million tonnes in Vale's so-called northern system, which groups Carajas, Serra Leste and S11D mines in northern Brazil.

However, Vale, one of the world's top nickel producers, said production of the metal fell 16 percent to 65,900 tonnes from the same period last year, mainly due to the reconstruction of a furnace and planned maintenance. (Reporting by Alexandra Alper and Marta Nogueira; Editing by Jeffrey Benkoe)