* Q2 iron ore output flat on year at 48.6 mln tonnes
* Iron ore sales below output
* Q2 copper output up 5 pct to 133,500 tonnes
* 2012 iron ore output forecast still 250 mln tonnes
* Shares shed day's gains
MELBOURNE, July 17 (Reuters) - Rio Tinto reported on Tuesday flat June quarter iron ore output from a year ago, while sales fell slightly short of output, putting pressure on its shares and heightening concerns about cooling Chinese demand.
The global miner derives about 80 percent of its earnings from iron ore and recently committed to spending $3.7 billion towards expanding its Australian iron ore capacity by another 25 percent, calling iron ore the best-returning commodities business in a tough global environment.
Chief Executive Tom Albanese said despite global volatiliy, the company's expansion projects still stack up.
"Global economic conditions and sentiment dropped markedly in the second quarter," he said in the company's quarterly operations review.
"We are keeping a close eye on the pace of the U.S. recovery, the continuing euro zone crisis and the impact of efforts to stimulate the Chinese economy on the markets that we serve."
Rio Tinto's iron ore production was steady at 48.6 million tonnes in the June quarter, compared with 48.9 million tonnes a year earlier and 45.6 million tonnes in the first quarter.
"Iron ore didn't recover as much (from the first quarter) as people had hoped," said JPMorgan analyst Lyndon Fagan.
On a 100 percent basis, second quarter shipments from its Western Australian iron ore operations were 57.4 million tonnes, compared with production of 58.4 million tonnes.
Smaller rival Fortescue Metals Group earlier reported a 54 percent jump in production in the June quarter to 19.2 million tonnes from a year earlier and said it was on track to reach 155 million tonnes a year by mid-2013, although its expansion costs had jumped 7 percent to $9 billion.
Fortescue's sales recovered more sharply in the June quarter than Rio's, which analysts said may disappoint investors.
"Rio's was OK, but it didnt' surprise me on the upside. I was expecting all of them to surprise me on the upside," said CLSA analyst Hayden Bairstow.
While production is booming, investors are worried about a profit squeeze with costs rising and iron ore prices down nearly 25 percent from a year ago as demand growth has slowed in China, the miner's biggest customer.
Weaker steel demand in China had curbed the appetite for iron ore, although a near-record pace of steel production sustained as mills shield their market share is likely to keep demand for the raw material firm longer term.
Hard coking coal output rose 13 percent to 2 million tonnes, thanks to the start-up of its Benga mine in Mozambique, stemming from Rio Tinto's $3.9 billion takeover of Riversdale Mining last year.
Copper output rose 5 percent to 133,500 tonnes, with improved output at the Escondida mine in Chile, co-owned by BHP Billiton, offset by lower grades at Kennecott in the United States.
Rio said aluminium output fell 12 percent to 841,000 tonnes, and gave no update on plans to jettison most of its Australian and New Zealand aluminium assets. Investors see a spin-off of the Pacific business to shareholders as the most likely decision, in light of the week outlook for aluminium.
Rio Tinto's shares slipped after the report to trade slightly lower, giving up all of their gains from earlier in the day.