(Adds analyst comment and share price)
By Stephen Eisenhammer
RIO DE JANEIRO, Oct 23 (Reuters) - Brazilian miner Vale produced 85.7 million tonnes of iron ore in the third quarter, the highest level in the company's history, as it ramps up output to counter falling prices.
Production of iron ore rose 3 percent on the same period last year and 7.9 percent on the previous quarter, Vale said on Thursday, beating forecasts from brokers Citi Group and Cowen and Company.
Growth at Vale, the world's largest iron ore producer, still lagged its Australian rivals. In recent days, Rio Tinto and BHP Billiton reported increases of 12 percent and 15 percent, respectively, in iron ore production.
Renato Antunes, analyst at Brasil Plural, said the figures were further "evidence of management's efforts to fix one of Vale's main disadvantages relative to peers over the past several years - (lack of) production growth."
Rising output from Australia in particular has come as China's growth and subsequent demand for iron ore slows, forcing the spot price .IO62-CNI=SI down 40 percent this year to near 5-year lows.
Vale shares fell 1.3 percent in morning trading, weighed by the iron ore price and political concerns over Brazil's upcoming election.
Recent polls suggest President Dilma Rousseff will win re-election in a second round vote on Sunday, beating preferred market candidate Aecio Neves.
Despite record production, Vale said shipments in the third quarter were hit by disruption to its railway at that Carajas mine in the Amazon. In September the railway used to transport ore to an Atlantic Ocean port was shut for four days due to a protest blocking its tracks.
Alongside its core profit driver of iron ore, Vale said it produced 72,100 tonnes of nickel in the quarter, a 16.4 percent rise from the same quarter last year. Analysts watch Vale's base metals division, of which nickel is the largest component, to see if it can help offset falling revenue from iron ore.
Vale also produced 2.34 million tonnes of coal, while copper production was 104,800 tonnes. (Editing by Jeffrey Benkoe and Bernadette Baum)