UPDATE 2-Vale sees 2010 iron ore output rising to 300 mln T

* Vale sees iron output rebounding with global economy

* CEO expects company to produce at near capacity

* Vale willing to abandon contracted prices with China (Adds comments on benchmark pricing, India, paragraphs 7-14; adds byline)

By Peter Murphy

SAO PAULO, Dec 23 (Reuters) - Brazilian mining company Vale (VALE5.SA)(VALE.N) sees its iron ore production in 2010 rising to around 300 million tonnes, boosted by a recovery in global demand, Chief Executive Roger Agnelli said on Wednesday.

Vale's output fell by around 30 million tonnes this year from its total production in 2008, which it previously said was 300 million tonnes, as international demand was hit hard by the global financial and economic crisis.

"In 2010 we will work, I think, at full capacity, at Vale's production limit (and reach) about 300 million tonnes," Agnelli told reporters after an event in Sao Paulo. "In 2009, we easily lost, I would say, some 30 million tonnes of production, some 30 million to 40 million tonnes."

Patchy recovery from the global economic crisis, with European Union countries and United States picking up slowly, contrasted with the strong recovery in Asia, Agnelli said. China is Vale's biggest customer.

Agnelli had said earlier this month that iron ore prices would likely rise in 2010 from this year's levels, underpinned mainly by strong demand from China.

"2009 was an atypical year. At the start of the year we reduced capacity and in the last five months we have reactivated production capacity," Agnelli said.

Vale has been accustomed to selling iron ore to China at a fixed benchmark price revised by annual negotiations, but no deal was concluded in 2009 amid the economic turbulence and volatility of prices in commodities and other assets.

Agnelli said Vale was prepared to switch to spot sales and abandon the benchmark system in trade with China if that was what the Asian nation preferred.

"If clients prefer spot, well then let's go to the spot market. For us, it can be either," he said.

Vale is already the world's biggest producer of iron ore. Agnelli said he hoped Vale would become the world's largest mining company within five years.

Asked about India's recent and rare import of iron ore, purchased from Australia's Rio Tinto (RIO.AX)(RIO.L), Agnelli said he doubted this reflected a long-term need.

The purchase was more likely to meet an exceptional immediate demand from the populous, fast-developing nation. But he said India could still bring opportunities indirectly for other miners if it began to produce more for its domestic market and reduce sales to China.

"That will make room for, for example, Brazilian and Australian miners to sell more to China," Agnelli said.

"India has massive reserves of ore, ore of good quality," he said.

(Reporting by Peter Murphy, Writing by Inae Riveras and Peter Murphy; Editing by Christian Wiessner)