The group says it is running its mines at higher production rates
Fortescue Metals Group Ltd (FMG.AX) expects iron ore prices to rise significantly in 2010/11 after falling in the previous 12-month period and is running its mines at higher production rates, it said on Friday.
The next round of benchmark contract prices, which dropped 33-44 percent in the shipping year that ends March 31, are currently under negotiation with major iron ore miners. Analysts are tipping price hikes of anywhere from 10 percent to 60 percent.
"We can now proceed ... into a far more confident period for both market growth and what we perceive now as demand-led price increases," Fortescue Executive Director Graeme Rowley said during a conference call with analysts and media.
Fortescue, Australia's third largest iron ore miner, was operating at an annualised production rate of 42 million tonnes, with a near-term target of 55 million tonnes, Rowley said.
This compares with an operating rate of 40 million tonnes in the half-year period ended Dec. 31, 2009.
Fortescue, like its much bigger rivals Rio Tinto (RIO.AX)(RIO.L) and BHP Billiton (BHP.AX)(BLT.L), has stoked output to keep pace with orders from China, the world's top steel producer and the company's biggest market.
Rowley also said Fortescue held contracts to ship up to 100 million tonnes of ore, though he did not elaborate over what the period.
During the first half of 2009/10, the company shipped 18.61 million tonnes of iron ore, up from 13.16 million tonnes in the previous corresponding period.
Rowley also said Fortescue was adhering to annualised benchmark pricing rather selling ore into the more lucrative spot market.
Spot iron ore prices are running at around $128 per tonne, CIF China .IO62-CNI=SI, which is about twice the price of the free on board benchmark price.
Fortescue is 17 percent owned by Hunan Valin Iron and Steel Group and sells almost all its ore to steel mills in China. (Reporting by James Regan; Editing by Jeremy Laurence)