UPDATE 1-Fortescue says H1 profit jumps 383 pct, misses market expectations

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SYDNEY, Feb 22 (Reuters) - Australia’s Fortescue Metals Group Ltd on Wednesday reported a 383 percent rise in interim net profit to $1.2 billion, surpassing the $319 million in the year-earlier period on the back of a surprise surge in iron ore prices, but still fell short of market expectations.

Analysts had forecast profit for the six months to Dec. 31 of about $1.5 billion, according to Thomson Reuters data.

“Our successful operational performance combined with positive market conditions produced strong cash flows facilitating further debt repayments of $1.7 billion,” Managing Director Nev Power said in a statement.

Fortescue declared a dividend of A$0.20 ($0.1535) per share.

Fortescue, Australia’s third-biggest producer, is aiming to ship up to 170 million tonnes of ore in fiscal 2017, mostly to China.

A push to hammer down costs has left Fortescue on par with larger rivals Vale SA, Rio Tinto Ltd and BHP Billiton Ltd , which combined control more than 70 percent of global sea trade in iron ore.

Iron ore was one of the best-performing commodities in 2016, defying analyst forecasts for a correction on the back of plentiful supply and an expected slip in demand from China, the world’s biggest buyer.

Iron ore and steel markets grew at a modest rate during 2016, industry figures show, with China importing a record 1.02 billion tonnes of ore, and steel production rising by 1.2 percent versus 2015. ($1 = 1.3033 Australian dollars) (Reporting by James Regan; Editing by Jonathan Oatis and Lisa Shumaker)