With operating costs remaining low, iron ore prices higher than expected, Chinese demand strong and seaborne supply tight, margins for Australian iron ore miners are expected to rise sharply in 2019. However we expect Australian production to be lower in 2019 compared to 2018 due to production disruptions following Cyclone Veronica and operational difficulties at Rio Tinto. Total FOB cash costs will remain low at US$21.66 per tonne, marginally down from last year. This is primarily due to lower operating costs which are offsetting a rise in royalty payments. A stronger iron ore market is also generating renewed investment interest. Along with approved mine developments from Rio Tinto, BHP and FMG, several smaller projects are gaining interest.