China's iron ore total cash costs have risen for the first time since 2013 primarily because of higher diesel prices. Domestic production has also declined as high cost producers who exited the market over the past 2 years have not returned despite stronger iron ore prices. Costs are expected to remain steady in 2018 but rise again in 2019 as higher fuel prices impact again. However, cost increases are likely to be gradual and unlikely to reach previous highs. The declining trend in domestic production is expected to continue as China's iron ore industry remains fragmented, low grade and high cost and will be replaced with lower cost imports from Australia and Brazil.