The world’s largest producer of iron ore, Vale, has reported a decline in profits and said demand for metals is starting to recover and may boost output.

Net income dropped to $790m, or 15 cents a share, from a record $5.01bn, or $1.04 a share, a year earlier, the company said after the close of trading yesterday.

The Brazilian miner was forecast to report earnings excluding some items of 30.5 cents a share, according to a Bloomberg survey.

Revenues for the quarter decreased by more than half to $5.1bn from $10.9bn in 2008 as the company reduced its iron ore production due to weak demand for steel, and agreed to cut its annual contract prices.

Revenues through the sale of iron ore dropped by 22.6% from the first quarter to reach $2.423bn as average sales prices decreased to $47.82 per metric tonne from $62.79 in the previous quarter, Vale said.

Iron ore production slumped 26% to 57.7 million tonnes compared to the previous year.

Iron ore shipments to China increased but weak demand in other regions affected the overall performance of the company’s sales.

Shipments to China reached an all-time high of 35.611 million metric tonnes, representing 66.2% of total shipments, followed by 8.2% for Brazil, 6.3% for Japan and 4.2% for South Korea.

Overall shipments of iron ore and pellets increased by 3.3% and nickel increased by 16.8% on a quarter-on-quarter basis.

“We expect to see global industrial production increase over the next couple of quarters with growth spreading to developed economies as well, shaping a globally synchronised upturn,” Vale said in a statement.