Iron-ore pellet output at Brazil's Samarco Mineracao S.A. accelerated in the third quarter, mainly on orders from China and demand recovery elsewhere, the Valor newspaper report Thursday.

Samarco's production reached 4.2 million metric tons in July and August, compared to just 5.4 million tons for the whole of the first half of the year.

Samarco is jointly-owned by Brazilian mining giant Vale S.A. (VALE) and its global competitor, Australia's BHP Billiton Ltd. (BHP).

Samarco's commercial director, Roberto Caravalho, said he expected to export 14.7 million tons this year, compared to 17.1 million tons in 2008.

According to Carvalho, China took 40% of Samarco's 9.6 million ton output in the January to August period, but European and Middle East steel mills were also aiding sales recovery.

European steel mills cut production by more than 50% in the last quarter of 2008, while many Middle East steel mills were closed, owing to cheap imports from Eastern Europe and Russia, he explained.

Now the two markets are buying pellets again.

"They are taking pellets almost at their normal pace, but with the short and medium term in mind. There is still some caution about the long term," said Carvalho.

"There's no conviction that the crisis is over. That's why we're working with three-monthly orders, despite the long-term contracts we have with our clients," he added.

"Before the crisis, we worked on orders of up to 18 months," he added.

Carvalho also said price was key factor in increased pellet demand.

Pellet reference prices were cut by 48.3% in 2009 long-term contracts with European and Asian mills, except China.

Sinter feed prices were only cut by 28.3% and pellets have become more competitive.

"Many steel mills are preferring pellets at this price, because it's more economical in steel production," said Carvalho. "Demand for pellets is greater than for iron ore at the moment."

The company has a production capacity of 21.6 million metric tons of iron-ore pellets.

-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086; John.Kolodziejski@dowjones.com