UPDATE 1-IMF sees Chile copper output growing at 3 pct/yr

(Adds output details, plans from fourth paragraph)

SANTIAGO, Sept 26 (Reuters) - The International Monetary Fund said in a report released on Wednesday it saw Chile's copper output growing at about 3 percent per year over the medium term, rebounding after supply concerns in recent years.

Chile provides about a third of global copper supply and is the world's largest producer of the red metal used mainly in construction and the automobile industry.

"Labor disputes and technical problems slowed production in 2006, but completion of several labor contracts and investment projects should propel output toward its projected medium-term growth rate of 3 percent per year," the IMF said in its report.

Chile's copper output rose only 0.8 percent in 2006 compared with full year 2005, hampered by a month-long strike at the Escondida copper mine, the world's largest open-pit copper project.

Chile produced 453,724 tonnes of the metal in July this year, down 1.5 percent from the same month last year, according to statistics released late last month.

Output from January through July this year rose 3.9 percent compared with the same period last year to 3,194,625 tonnes.

"Water and environmental constraints could eventually limit the pace of expansion, but Chile's copper deposits are deemed large enough to sustain production for longer than in most other countries with non-renewable resources," the IMF said in its report.

BHP Billiton (BHP.AX: Quote, Profile, Research) (BLT.L: Quote, Profile, Research), the world's biggest miner, late last year launched its Spence copper project in northern Chile and expects it to produce 180,000 tonnes of copper cathodes in 2007.