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UPDATE 2-Rio Tinto doubles H1 earnings, adds $1bln share buyback

(Adds CEO, analyst quotes, details)

SYDNEY/LONDON, Aug 2 (Reuters) - Global miner Rio Tinto more than doubled its first-half profit and rewarded shareholders with a record interim dividend and a further $1 billion in share buybacks, citing strong demand for industrial commodities.

Underlying earnings for the six months to June 30 of $3.94 billion missed forecasts for $4.19 billion, according to Thomson Reuters I/B/E/S, but were well above last year's $1.56 billion on a recovery in iron ore and other commodity prices.

Rio Tinto declared a record-high half-year dividend of $1.10 a share, equivalent to $2 billion, up from 45 cents a share a year ago. The latest buyback comes on top of a $500 million programme announced in February.

"The Chinese economy has performed well in 2017 and the outlook signs for 2018 are positive," Chief Executive Jean-Sebastien Jacques told reporters. "Beyond China, global economies have both improved in Europe and the U.S."

Rio's London-listed shares were trading down 1.8 percent in early trade, with analysts citing some disappointment over the miss in earnings, linked to the cost of paying down debt early.

"The balance sheet is in great shape ... suggesting that there is some flexibility in regards further capital management upscaling for the full year," said Shaw and Partners analyst Peter O'Connor.

Iron ore, which generated $3.255 billion in underlying earnings in the first half, has been on a roller coaster ride this year, with prices trading between $53 and $95 a tonne and now just under $74. <.IO62-CNO=MB>.

The market has been underpinned by a resurgence in Chinese steel production, which depends heavily on high grade imported iron ore, providing Rio Tinto and other producers with ample margins on shipments.

Long time iron ore bear Goldman Sachs recently raised its 2017 iron ore forecast to $70 a tonne from $55.

Rio Tinto's full-year dividend is typically weighted toward the second half, which could see an even greater payout, given the company is scheduled to receive payment of $2.69 billion for the sale of its coal & Allied division in Australia to Yancoal Australia

Rio Tinto said capital spending should rise by around $500 million to $5.5 billion in both 2018 and 2019.

Rio Tinto's focus on shareholder returns could place pressure on rival BHP Billiton to seek ways to better reward its shareholders. BHP is under pressure from activist shareholder U.S. fund Elliott Management to beef up its cash management policy and remove underperforming businesses from its portfolio. 1/8 nL3N1HI3HI 3/8

BHP will report its full-year results on Aug. 22.

(Reporting by James Regan and Barbara Lewis; Additional reporting by Shashwat Pradhan in Bengaluru; Editing by Richard Pullin)