End game - lowest cost wins, page-10

Management are just behaving rationally in a market that has aggressively expanded supply capacity. Would you rather they sit back with 2008 costs and production levels and get crushed by FMG and BHP? RIO should be applauded for getting their costs so low and scale so high, sure it is a buyer's market right now but they will shake out the marginal suppliers and their margins will go up. Probably not to $180 levels but that was never going to last.

There just happens to be a lag due to the time it takes to add new Iron Ore capacity, and high barriers to exit for those who are losing money. We may even see IO prices below RIO's costs due to chronic oversupply but eventually we will reach a new equilibrium. When that happens, RIO is the one to own.