SYDNEY - Fortescue Metals Group 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 between 33% and 44% 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% to 60%.

"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 tons, with a near-term target of 55-million tons, Rowley said.

This compares with an operating rate of 40-million tons in the half-year period ended December 31, 2009.

Fortescue, like its much 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.

Rowley also said Fortescue held contracts to ship up to 100-million tons of ore, though he did not elaborate over what the period.

During the first half of 2009/10, the company shipped 18,61-million tons of iron-ore, up from 13,16-million tons 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/t, which is about twice the price of the free on board benchmark price.

Fortescue is 17% owned by Hunan Valin Iron and Steel Group and sells almost all its ore to steel mills in China.