yeah it's a no brainer now uncle Mustapha. Chinese millionaires sending their kids & money out of China, and investing overseas is a sign that their own corrupt system is unraveling. Heck, they don't trust it themselves, who are we to say?
now when it does unravel, we will get hurt down here. We have fuckall else to offer them except iron ore, which now they increasingly don't want.
Yea I read that quote in another article today as well! The price was $90/tonne and heading south a year or more ago before they opened their mine in Dec - they should absolutely have been factoring in the risk of an iron price sub $80, and invested accordingly. It was surely obvious that prices would fall as increased capacity from the big miners came into play as well.
Sometimes I think about buying speculative / junior mining stocks, but then I take a bex and have a good lie down, usualy after that I feel better. This is why! They often have clueless boards and management.
Build it and they will come..........
Common sense is a curse - those who have it need to suffer dealing with those who don't have it.
yeah it's a no brainer now uncle Mustapha. Chinese millionaires sending their kids & money out of China, and investing overseas is a sign that their own corrupt system is unraveling. Heck, they don't trust it themselves, who are we to say?
now when it does unravel, we will get hurt down here. We have fuckall else to offer them except iron ore, which now they increasingly don't want.
there are a couple of things they want, Foxbat told me. 150 is the number. Peter
Guest
8 Sep 2014, 09:32 PM
Don't the chinese only produce 50% of their own iron ore? If 50% of the market was turned off the spot market would go insane.
Don't the chinese only produce 50% of their own iron ore?
Not all ores are the same. Chinese iron ore is generally low quality, something like 20%.
So 500 million tonnes of Chinese iron ore is only good for 100 million tonnes of steel. Where as 500 million tonnes of Australian ore is generally around 60% quality and is good for 300 million tonnes of steel. Not to mention all the other savings in dealing with a more pure product. So in real terms the vast majority of the iron component of Chinese steel is imported.
Quote:
"But nobody can anticipate a fall in the iron ore price from $US136 a tonne when we opened the mine in December to $US84 a tonne," said Mr Allert, who owns about 4 million shares.
What goes up will come down, iron ore is not the most liquid of commodities! It only has one big buyer, when they dip out it is in freefall.
14 years ago iron ore was about $15 or 20 tonnes to an ounce of real money. So $80 is a more realistic price today if we value gold at $1600. But if the market is excessively over supplied then we could expect much worse than that. If interest rates were to rise the result would be more lethal.
Oh-oh….On 12 March the Sydney Morning Domain noted that… “an astounding 12 per cent slide in the price of iron ore could wipe as much as $4 billion off budget revenues.
The iron ore price crashed 8 per cent on Monday night after sliding about 4 per cent late last week. The price of $US104.70 a tonne is the lowest since October 2012.
At the time of the December budget update, the iron ore price was $US120 a tonne”
Well….. we are now at $US83 a tonne or 30% lower than $US120 – so does that mean there is now a $10billion black hole??
AND I presume this doesn’t include the drop in mining royalty income for WA and QLD???
This historic bear market in materials will weigh heavily on the ASX200 in-and-of itself. But that is just the beginning. Mining income is national income and as the latter stalls, households will find it increasingly difficult to increase spending to offset the mining capex and income downdraft. Per capita disposable income is already falling in the economy and has been since the terms of trade peaked in 2011.
As income falls accelerate, firms in the discretionary services and retail sectors will also find sales growth difficult. Indeed non-mining corporate sales growth has a very strong relationship to income growth.
There will be some offset in high immigration, which helps grow the pie, but the headwinds per capita will be difficult to overcome for any business dependent upon domestic demand for growth. This will prevent any material upturn in non-mining investment.
The main channel for falling iron ore to hit households is through national and state budgets. The primary windfall for households from the boom was in tax cuts, as gains in corporate taxes were recycled as personal tax relief and middle class welfare.
Indeed, from 2003 to 2010, the ratio of household income being taxed fell to a 35 year low.
That has now begun to reverse, and will continue to do so, as corporate taxes fall federally and royalties fall at the state level. Both Abbott Government and Barnett Government forecasts for iron ore are going to miss badly – $105ish and $122 respectively – hitting forecast surpluses as revenues fall short. Both will respond with more spending cuts and tax rises over forward estimates given their electoral commitments.
The current debacle in the senate, with the Budget still unresolved four months later, is only a taste of things to come. By the mid-year ec0nomic update (MYEFO) in December, the Government may still not have passed all of its May budget yet it will find itself with another huge black hole to fill.
It is unlikely that the renewed iron ore forecasts will be bearish enough and the pattern will continue to repeat (as it has now for three years), with each budget failure another material income and confidence hit to households.
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