SYDNEY - Output will rise this year at Australia's third largest iron-ore miner, Fortescue Metals Group, the firm said on Thursday, as it plans to look beyond China for new growth in Asia.

Fortescue, like its bigger rivals Rio Tinto and BHP Billiton, has stoked output to keep pace with orders from China, the world's top steel producer and the company's biggest market, with sales booked at 45 mills.

In the past year, Fortescue increased its overall annualised operating rate to 40-million tons from 35-million as it increased the size of its mines.

By the end of 2010, Fortescue aims to lift its annual operating rate to 55-million tons per year, an increase of 37,5%, and some of that ore would go to new customers outside of China, executive director Graeme Rowley said.

"What you're starting to see is round one of new work in a marketplace that is now opening up," Rowley told reporters on a conference call.

He added that as Fortescue production in the Australian outback grows with new mines, shipments like one for 170 000 t to an unspecified Asian steel mill last year would become routine.

In the December quarter, Fortescue shipments rose 44,6% to 9,08-million tons from 6,28-million a year earlier, while ore production totalled 9,15-million tons, up from 8,46-million tons.

Next year, Rio Tinto wants to lift iron ore mine capacity 6% to 230-million tons, followed by a much bigger jump to 300-million tons in five years.

BHP Billiton's iron ore production is earmarked to grow 36% to 155-million tons this year.

In Brazil, Vale this week said it was heading toward record iron ore exports this year as it runs its mines near their 310-million-tons-per-year maximum.

PRICES EXPECTED TO RISE

Commodity analysts expect iron ore prices to rise between 15% and 50% for benchmarked shipments starting April 1. The more volatile spot market has already zoomed to nearly double this year's annual price.

Rowley said the strength of the iron ore spot market gave good reason to expect a significant hike in the next benchmark price.

"However, it also remains a possibility that, as per the previous contract year, there will not be a benchmark agreed for China in the next contract year," he said.

Chinese mills have refused to sign one-year price contracts for the current shipping year with overseas suppliers after Japanese and South Koreans mills agreed to buy ore at discounts of 33% to 44% on the previous year, arguing the discount should have been greater.

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