When you are in business,it always pays to be the lowest cost producer.
Nothing wrong with that,it helps you make more profit.
When new competitors come along the last thing you do is let them get established in the first place and then even worse force a price war upon them to try to drive them out of business once they are firmly settled in.
It then becomes a race to the bottom and a case of who has the largest pockets to sustain a low profit business the longest.
Instead of holding back production to price gouge you customers,while you can,far better to increase production and keep prices at levels that make the market/business unjustifiable to enter.
No Competition in sight and no dent to good steady continual profits.
Seeing the pace at which the large players can apparently magically crank-up existing infrastructure for litle cost says someone has played a very dumb end game and NOW has FMG lining up to produce near 200MTpa in competition and possibly as cheap as the two existing major Aussie exporters in the very near future to boot.
Incase the Big boys forget many of the new comers have large Chinese Investment tied to breaking this stranglehold.
In the future,they will preferentially buy from WHO and at WHO's cost?
The scary thing is while all this has been happening,Vale has nearly succceeded in getting its Valemax boats into China with a comensurate drop in freight costs of an estimated $5/ton saving making its shiping costs comparable with Port Headland.With 20 or so more of the 500Kt boats adding to its commercial advantage on order to be Chinese owned and leased to them.
I call it a good example of how not to make money in BIG business and How to guarantee your low cost business becomes more costly on declining future sales volumes now the boots on the other foot and your customer prefers to buy elsewhere.
DYOR + DYODD I suspect I know who'll see it harder to make spot sales and get longer term IO supply contracts in the future.If there's 300MTpa oversupply,you can guess who will maybe have to be taking cheaper spot prices and who won't.
