UPDATE 3-Rio Tinto sees iron ore price drop, but not 50 pct

* Rio says drop in iron ore prices warranted this year

* Says 50 percent price cut too much

* Doesn't see tie-up with Chinalco influencing price talks

* Rio shares fall 2.8 percent in London

(Adds Rio shares in London)

By Fayen Wong

PERTH, March 24 (Reuters) - Iron ore prices are certain to fall in 2009, the first decline in seven years, but not by the 50 percent suggested by some steel makers, Rio Tinto RIO.A (RIO.L) said on Tuesday.

"We need to recognise the fundamentals of the market and the market would show that it does need a downward adjustment this year," Sam Walsh, head of Rio's iron ore division, said on the sidelines of a mining conference on Tuesday.

But given the potential for a recovery in industrial demand at some stage and indications from the spot ore market, prices don't need to halve, Walsh said, breaking a tradition of keeping silent on price issues until talks are concluded.

"If you look at the current spot price it really doesn't verify a 50 percent reduction in prices."

On the spot market, iron ore sells for around $60 a tonne, about $30 under the prevailing term price.

In comments to reporters, Walsh also said a pending deal that would give China's state-owned Chinalco an 18 percent stake in Rio, and holdings in several operations including 15 percent of its Hamersley iron ore mines, would not influence the outcome of the iron ore talks, which include Chinese steel makers.

Rio shares in London fell 2.8 percent to 2,227 pence by 0842 GMT, underperforming a 1.8 percent decline in London-listed mining stocks .FTNMX1770 as copper prices slipped. In Australia, Rio shares had jumped 5.6 percent.

Rio shares, which touched a four-month peak on Monday, have outperformed the index by nearly 30 percent so far this year.

HEADING FOR GLUT