By Rebecca Keenan

April 20 (Bloomberg) -- Fortescue Metals Group Ltd., Australia’s third biggest producer of iron ore, said third- quarter shipments jumped 53 percent amid increased demand from steel mills in China.

Ore shipped was 9.4 million metric tons in the three months ended March 31, from 6.2 million tons a year earlier, Perth- based Fortescue said today in a statement to the Australian stock exchange. That’s below a Credit Suisse Group AG estimate of between 9.5 million tons and 9.6 million tons.

Fortescue is expanding its iron ore output and plans to raise as much as $8.9 billion to fund the new Solomon project close to its existing mine in Western Australia’s Pilbara region. The world’s largest iron ore producers, Vale SA, Rio Tinto Group and BHP Billiton Ltd. are moving to quarterly pricing agreements with customers, away from traditional annual contracts.

“Going forward Fortescue’s pricing arrangements will be consistent with the industry move to a market-aligned system,” the company said today. It sold ore at an average of $69 a ton in the quarter, up 19 percent from the December quarter, it said.

Fortescue gained 1.8 percent to A$5.17 at 11:24 a.m. Sydney time on the Australian stock exchange.

The company is seeking to ship about 40 million tons this year before an expansion in 2011 intended to boost capacity to 55 million tons a year, it said. Production costs in the quarter increased to $29.43 a ton from $27.43 a ton in the December quarter, the company said.

--Editors: Keith Gosman, Gavin Evans

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net;

To contact the editor responsible for this story: Andrew Hobbs at ahobbs@bloomberg.net

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