(Recasts paragraph 1, adds details on nickel ops in paragraphs...

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    (Recasts paragraph 1, adds details on nickel ops in paragraphs 4-5)

    Jan 18 (Reuters) - BHP Group (BHP) reported a 2.2% drop in second-quarter iron ore production on Thursday as it integrates its rail system at the Pilbara business, and said it was evaluating options for its nickel operations to mitigate the impact of the sharp fall in prices.

    The world's largest listed miner said iron ore production from Western Australia on a 100% basis was 72.7 million tonnes (Mt) in the three months to Dec. 31, down from 74.3 Mt reported a year ago.

    That compares with a Visible Alpha consensus estimate of 72.5 Mt, according to Morgan Stanley.

    BHP also said it was optimising its Nickel West operations.

    "The nickel industry is undergoing a number of structural changes and is at a cyclical low in realised pricing. Nickel West is not immune to these challenges," it said in a statement.

 
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