Article from UBS - which makes the same point I raise here six...

Article from UBS - which makes the same point I raise here six or so months ago. History says current margins are too high.

Those who have come late to the iron ore story (anyone post the start of the great boom) will of course take a different viewpoint. Which is why they think $100-120/t is sustainable.

Through-cycle EBITDA margin normalisation

Iron ore producer margins have been at cycle-high, almost windfall levels, at various times in the last decade. Margins in the 60-80% range are, we believe, broadly unsustainable as these tend to occur at iron ore prices well above the cost curve and incentive prices.

However, given the concentrated nature of iron ore supply, and the very low operational cost of large, long-lived, mid-high grade, capital-intensive iron ore mines operated by the top 5 or 6 global iron ore miners, a strong mid-cycle EBITDA margin has been observed over the years/decades.

We understand that multi-decade average EBITDA margins for the two large Australian producers before the emergence of China in the early/mid 2000s was in the ballpark of 40-50%. This would seem a fair mid-cycle EBITDA margin range to factor into long-term price expectation