Macquarie said the Brazilian and Australian iron ore producers may have concluded that most of the “gains” from the recent bull market in steel prices (which have more than doubled), have been shared with high cost/low quality short term industry players from India and China – and not the mainstream suppliers themselves “who have supported the steel industry for years”

And the bank said that the big three suppliers, namely CVRD, BHP Billiton, Rio Tinto, will be unphased by the danger that big price rises will attract additional competitors.

This is because, “rightly or wrongly”, the three believe that the wannabes either have “inadequate reserve bases and/or have grossly under estimated the cost and time it would take to truly start a greenfields operation”

Further, and “more fundamentally”, the three believe that it’ll have little effect on the decision making processes of these third parties whether the price rises by 25% or 50%.

“So why not grab what you can when you can,” the bank says.

Increased demand from China is another plus in the producers’ favour, with Macquarie agreeing with the view that even with the large expansions planned by the big three, an iron ore shortage will “persist for many years to come”