Andrew Forrest may not like the idea much but there is a good chance that Australian iron ore will generate more national income over the next decade than it did through the 10 years of boom times that came so suddenly to a halt last November.

A report prepared for the Minerals Council of Australia (or Rio Tinto) by Port Jackson Partners predicts that the Pilbara's powerful iron ore troika along with a subset of much smaller producers will sell $615 billion of iron ore between now and 2025.

That is 40 per cent more than the $430 billion of revenue that those same producers generated through 2005-14, the decade that was punctuated by peak iron ore pricing.

"Australia now has a 50 per cent share of the seaborne market, a share built on vastly expanded production volumes, which now exceed 650 million tonnes per year. This compares with 170 million tonnes in 2000. This will enable the industry to add more value to the Australian economy over the next decade than over the previous 10 years," PJP predicts.

In normal circumstances, of course, this potential would bring nothing but joy for Forrest to contemplate. But, right now, it arrives at an inconvenient possible truth for an iron ore billionaire whose preferred narrative is one of crisis created by rapacious oversupply.

Forrest is said to be maintaining his rage over the state of the iron ore market. The chairman of Fortescue, like his executive, believes that his more muscular Pilbara competitors spent the back end of 2014 talking down the iron ore price to maximise their future market power.

The occasionally disjointed Forrest proposition is that the precipitous fall in the iron ore price through the final quarter of calendar 2014 was triggered by promises from management at both Rio Tinto and BHP Billiton that they would continue to run their expanded production platforms at capacity despite the certainty that the market would soon drift into oversupply.

PROMISE AND PREDICTION

The combination of promise and prediction has introduced a new generation of speculator to the iron ore market and, ever since, the price has not reflected the near equilibrium of supply and demand that Forrest insists is our current reality.

Conversely, Forrest also accuses the majors of over investing in low-cost supply to the detriment of all of their stakeholders, from government to tax payers to shareholders. And along the way, Forrest has appeared to invite Australian iron ore into an export cartel that would shape supply to sustain market equilibrium and stronger-for-longer pricing.

But PJP begs to differ. It finds that the Australian iron ore industry (Forrest and Fortescue included) did exactly what it should have in response to the surge of demand out of China through the opening years of the 21st century. It also suggests that any attempt to manipulate pricing outcomes by government intervention would be ineffective at best and counterproductive at worst. And, most importantly, it attempts to illustrate how the industry's focus on capacity and its most effective use will most likely more than mitigate the damage done by iron ore's return to long-run average price ranges.

Obviously there are a few moving parts to the PJP forecast. It is, for example, based on the consensus of analysts' forecasts for the long run iron ore price and a spot exchange rate. So that $615 billion number is built on a $US72 iron ore price and a US78¢ exchange rate. This seems a bit high on both sides of the equation and reinforces the view that one certainty of long-term forecasting is that you will be wrong. But the underlying truth revealed by the PJP analysis holds true. Australia has been well-served by an iron ore industry that reinvested its boom-time spoils in new capacity rather than be deflected by shorter-term priorities.

DISTINCTLY RATIONAL LENS

The report is valuable primarily because it offers a distinctly rational lens through which to review the stunning effect of China's embrace of the seaborne raw materials markets and to preview the next phase of its influence on minerals and bulk commodities markets. It represents a step back from May's diverting rancour to the disciplined, fact-based world more usually inhabited by big mining. And it is more the welcome for it.

In iron ore that next phase means the end of the $81 billion investment in new Australian mining and infrastructure capacity and the beginning of the long harvest of the fruits of that investment. Given iron ore does match the PJP 10-year revenue forecast of $615 billion, then the firm predicts that shareholder returns will double from $91 billion over the decade past to $203 billion over the decade ahead. While there will be little or no investment in new capacity, the miners will need to double their sustaining capital spend to $49 billion and their operating costs are projected to rise by more than $100 billion to $242 billion. The miners are also projected to pay more corporate tax over the forthcoming decade (up from $71 billion to $81 billion) and generate more state royalties (up from $28 billion to $40 billion).

Of course, the potential that this matrix of contributions to the economy was going to fall because of price reversion triggered by oversupply sat front and centre in Forrest's political campaign to bring his competitors to heel.

"The case for 'doing something differently' seems to arise from a dissatisfaction with the way markets work, the role of Australian iron ore producers within them, or a belief that something about the way the Australian industry has evolved means ongoing, unrestricted exposure to the iron ore market is no longer wise," PJP reports.

"The evidence in fact supports completely the opposite diagnosis: the global iron ore market is operating as it should, and as all mineral commodity markets do."

PATIENCE AND TEMPERANCE

Critically, PJP recommends patience and temperance for any government that might contemplate intervention in the iron ore market, or any other for that matter. At the hysterical height of the great iron ore debate, this potential was offered as one motivation for the campaign confected by Forrest and Fortescue. But that ambition was always denied by both man and company.

But any form of market control would fail and would likely result, as it has in the past, in Australia simply surrendering hard won market share to competitors. "History suggests that the burden of proof is very high for market intervention as a policy lever to control price," PJP says.

After noting that Australia governments had already unwound virtually all their legacy marketing platforms, PJP identified how controls on iron ore production had been tried and failed in the past. Export controls were introduced by Australia in the 1970s and, in combination with increasingly fractious industrial relations, they drove the Japanese steel mills into the arms of the Brazil producers. A generation of growth stalled as Australia lost market share to its suddenly bigger competitor.

The analysis identifies how wrong-headed is the assumption, reasonably widespread, that the iron ore miners somehow wasted great licks of their owners capital in responding to China-derived price signals by delivering lashings of new supply.

MARKET SHARE HAS GROWN

In contrast, PJP finds that the miners have grown market share while generally lowering costs in the face of a newly competitive seaborne iron ore market. In this achievement iron ore sits alone in Australia. In nickel, gold, copper, oil, zinc and even thermal coal, where investment has been heavy, global production growth has outpaced local increases.

According to PJP, back in 2000 only half of Australia's iron ore production sat in the lowest 25 per cent. This cost position eroded through the capacity investment cycle but now more than 80 per cent of Australian production (pretty much all of it in the Pilbara) sits in the bottom half of the global cost curve. And that is where it needs to be to prosper no matter where the price bounces to over the coming weeks, months and years.

"The core of Australia's iron ore sector is robust," PJP concludes. "Despite industry-wide cost reductions, more than 80 per cent of Australian capacity is in the bottom half of the global cost curve and will continue to generate strong operating cash flows.

"Even if growth continues to slow, Australian iron ore will remain a powerful wealth generator for Australia. The annual level of activity in the iron ore sector from ongoing operations alone is now much greater than even investment-driven activity over previous years."