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Iron ore shipped by Australia's Rio Tinto Ltd. (RIO.AU) and Fortescue Metals Group Ltd. (FMG.AU) crept up 2% on year to 57.7 million tons in the third quarter, the companies reported Thursday.

The relatively slow growth, at a time when iron ore prices remain well above year-ago levels, illustrates the constraints faced by producers in ramping up exports from Australia's northwestern Pilbara region, responsible for around a third of international iron ore trade.

The benchmark Platts iron ore index settled at $150.50 a metric ton Thursday, compared with a $75/ton-$100/ton range a year earlier.

In a report for the July-September quarter, Rio said iron ore production rose just 1% to 47.6 million tons, from 47.0 million tons in the same quarter last year.

Fortescue, Australia's third-largest producer of iron ore, was expecting a drop in output, but said planned maintenance shutdowns didn't cut output as much as expected, with the final figure exceeding guidance of 9-10 million tons.

Along with BHP Billiton Ltd. (BHP.AU), the two companies account for most of Australia's iron ore exports.

Rio Tinto said it would produce around 179 million tons of iron ore in 2010, while Fortescue said the guidance would be in the range of 40 million tons for it's fiscal year ending of June 2011.

Iron ore exports from the Pilbara have been constrained by the limits of the region's infrastructure. Rio and BHP have separate rail lines and port facilities for exporting ore from the iron-rich region, and Fortescue has sued with limited success to secure third-party access to that infrastructure.

Fortescue was forced to build its own rail line and port to export iron ore from its Cloudbreak and Christmas Creek mines in the Eastern Pilbara, and plans to spend up to $6 billion to expand its operations.

A desire to make the most of the limited infrastructure in the region was a motivation behind BHP's 2007 bid for Rio and a subsequent proposal to combine their Pilbara operations, which is believed to be facing resistance from competition regulators in Europe and Asia.

"Our challenge is to ramp up volumes as quickly as we can," said Russell Scrimshaw, Fortescue's executive director. "It certainly is in our interest to accelerate expansion rapidly."

But that expansion is coming at a steadily rising cost.

Fortescue said its production costs continue to rise, increasing 8% to $34.83/ton in the July-September quarter from $32.25/ton in the previous quarter.

Yet, strong demand and high prices are encouraging producers to invest ever more in adding capacity.

Announcing its half-year results in August, Rio Tinto said it would commit around $13 billion to capital spending by the end of 2011, with bulk of the money going into iron ore production, principally in the Pilbara region and Guinea's Simandou deposit which is being jointly developed with China Aluminum Corp.

"We approved more than $4 billion of capital projects during the third quarter, including investment towards the expansion of our Pilbara iron ore operations to 330 million tons per annum," Chief Executive Tom Albanese said in a statement.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com