Quarterly shipments increased 9% to 46.4 million tonnes, while C1 costs dropped 4% to US$12.54 per wet metric tonne.

It took the company's first-half performance to a record 88.6Mt shipped.

"Quite frankly, the operations really are humming," FMG chief operating officer Greg Lilleyman told reporters this morning.

In light of the strong performance, FMG expects full-year shipments to be at the upper end of the guidance range of 170-175Mt, while cost guidance has been lowered to $12.75-13.25/t from $13.25-13.75/t.

The average realised price of iron ore was $76 per dry metric tonne, representing a price realisation of 86% of the Platts 62 index.

It was slightly weaker than the September quarter's revenue of $85/t at a price realisation of 89%.

Lilleyman and CEO Elizabeth Gaines were recently in China and said demand remained strong, pointing to Chinese steel production of 996Mt last year, an "astonishing" 8.3% increase.

FMG is expecting 2-3% growth in steel output.

Iron ore markets are typically quiet now due to Chinese New Year, but have been unusually volatile this week due to the outbreak of coronavirus.

Gaines said the impact of the virus was an evolving situation.

"Seasonally, this is a period where activity can be a bit more subdued," she pointed out.

Ports in Hebei province have been closed, though FMG has no scheduled deliveries to the area until the end of February.

"At this stage, it's only impacting sentiment rather than physical trade of iron ore," Lilleyman said.

"There's nothing to indicate prices will be fundamentally impacted."

FMG opened a new office in Shanghai this month, with new subsidiary FMG Trading Shanghai Co achieving sales of 3Mt.

The office is closed for Chinese New Year.

"All China-based employees remain well," Gaines said.

FMG had net debt of $700 million at December 30, comprising gross debt of $4 billion and cash of $3.3 billion.

Today FMG announced the $450 million Pilbara generation project, the next stage of its Pilbara Energy Connect program, which complements the $250 million Pilbara transmission project announced in October 2019.

The Pilbara generation project will include 150MW of gas fired generation, together with 150MW of solar photovoltaic (PV) generation, supplemented by large scale battery storage and will be constructed, owned and operated by FMG.

It will provide power to the Iron Bridge magnetite project.

"By installing 150MW of solar PV as part of the Pilbara generation project, the modelling indicates we will avoid up to 285,000 tonnes of CO2e per year in emissions, as compared to generating electricity solely from gas," Gaines said.

"Importantly, Pilbara Energy Connect allows for large scale renewable generation such as solar or wind to be connected at any point on the integrated network, positioning Fortescue to readily increase our use of renewable energy in the future."

FMG shares dropped 2.3% to A$11.27. The stock hit an all-time high of $12.87 a week ago.