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The Chinese mill noted on its website that the contract would further ease the tight supply of iron ore.
Hangzhou Iron and Steel Group said it had also signed a mid- to long-term memorandum of understanding with Rio Tinto and that it would also hold talks with BHP Billiton. The company did not elaborate further.
FMG also has iron ore offtake agreements with China's largest mill Baosteel and China's third-largest steel mill Tangshan Iron and Steel Group.
In its October construction report, FMG said its Pilbara project was 72% complete at the end of October and remained on schedule for first shipment of ore in mid-May 2008.
The company expects annual output of 55 million tonnes which will eventually be ramped up to 200Mt.
Hangzhou Iron and Steel Group is a large enterprise group mainly involved in steel multi-development. The group has total assets of $RMB29.072 billion ($A4.5 billion) and 41 wholly-owned and share-holding subsidiaries.
MiningNews.net was unable to reach FMG for comment at time of writing.
Shares in FMG have slipped $2 to $53 in early afternoon trade.
