All Posts Tagged With: "iron ore"

The golden age of iron ore profits is ending for Australia. Europe’s banking system is slowly going bust because of the government debt crisis. Europe is a big customer of China’s. China is a big customer of Australia’s.

The Aussie market is up 2.77% since the Federal election on August 2nd, if you’re using the ASX/200 as your proxy. This whole “not having a government thing” is working out well for investors. It turns on the uncertainty of having no-one in charge is better than the certainty of having someone in charge. Maybe that will all change this week, though. To begin with, the jobs data from the U.S. gave the market a positive lead. We’re not sure this matters one little bit.

Before we get stuck into today’s financial world, a request: please don’t store petrol in your garage. A reader took us to task for suggesting that last week in our survivalists “to own” list. It was just a list. But her point is well taken. Petrol doesn’t keep well. And you may need it later to burn all your paper money and furniture to keep warm. So store it somewhere safe, if you’re going to store it at all.

You can’t have steel without iron ore. And you can’t have a resource boom without an iron ore boom. Just ask the government. It’s counting on soaring prices for iron ore and coal (along with soaring volumes) to deliver an extra $6 billion windfall to Federal coffers, according to today’s Australian Financial Review. The government cutting its deficit next year and returning the nation’s finances to surplus by 2012-2013 when the new bill of attainder becomes the law of the land.

But we asked him via email if the proposed boycott of the Aussie iron ore majors (BHP and Rio) by the China Iron and Steel Association (CISA) was having effect on the smaller iron ore stocks he’s recommended. Incidentally, we wouldn’t expect the move to stick.

The main conclusion was that Australia would see rising export earnings on higher volumes but moderating commodity prices. In other words, the China boom will drive export volumes for the next five years. But you won’t see any more mammoth increases in commodity prices.

And while we’re on the subject of China we should relay that Citic Pacific Ltd, which is an arm of China’s largest state-owned company, is set to spend more on magnetite iron ore projects in Australia. Magnetite is a lower grade ore than the hematite ores that BHP and Rio have all but locked up in the Pilbara.

“China’s steel output has taken up 48% of the world’s total in the H1 of this year, further exacerbates the oversupply picture and hurts the healthy industrial development. And Mr Roland Verstappen vice president of ArcelorMittal also said steel overcapacity is quite clear in China and which will press down steel prices, sweep smaller mills out of the market and causes unemployment.”