From the AFR:
Morgan Stanley said this week that private iron ore traders in China expect oversupply will drive spot iron ore down further, to $US70 a tonne by the end of the year, and there is little upside to demand out of China. Iron ore financing in China also poses a big price risk.
Local governments in China are supporting domestic iron ore production by cutting taxes and therefore volumes will decline less than they did in 2012 – during the last great correction, Morgan Stanley wrote in a note to clients.
“They suggested iron ore financing is snowballing into a bigger problem, as steel mills roll over multiple letters of credit to pay for old ones and are forced to sell in the spot market to raise cash, which in turn puts more downward pressure on iron ore.”
Currently, getting letters of credit from banks requires a 20-30 per cent deposit for players with good credit and 50 per cent to 70 per cent deposit for players with poor credit.
Hoocoodanode?
