Members Report: Will iron ore crash the economy?

Iron ore is going to $70 sooner rather than later. The oversupply in the market is big but is headed for huge, somewhere between 200 and 300 million tonnes per annum (mtpa) capacity within eighteen months. To balance the market, roughly two-thirds of the rationalisation is going to come from seaborne supply. That means a lot of Australian production is going to close, along with assorted international high cost producers.

The largest marginal supply in the global seaborne market is Fortescue Metals Group (150mtpa). It’s cost of production is likely to form the price floor as the global shakeout transpires, somewhere around $70:

What does $70 iron ore mean to Australia?

The full text of this article is available to MacroBusiness subscribers

$1 for your first month, then:

$24.99 / month

$249 / year

Cancel at any time through our billing provider, Stripe

Share

About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.