Pincer update

Some good news and bad news today on Australia’s paired macro vulnerabilities. The good news first. On the houses side of the economy, bank CDS prices have fallen a little:

I’m as certain as anything in this world that this is only a breather before we go higher.

Meanwhile, on the holes side of the economy, we find the bad news. Iron ore fell more sharply yesterday, down 1.1% to $133.60:

As you can see on the chart, Shanghai rebar also fell a half a per cent or so to  a new low. In better news, iron ore futures closed slightly up for the second day and are holding above the important $120 psychological level for now.

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  1. Aristophrenia

    I heard that the profit level was $100 is this true ? So a drop from $180 down to $140 halved their profits.

    No wonder BHP is getting into Potash (lmao), no where else to go. Maybe they could get into compost or sand ?

    • FMG claim $52/dmt cost to get out of the ground FOB. BHP & Rio I think are around the low $40’s. You have to remember that in 2003 Fe was sub $20

      • Aristophrenia

        Understand that, and not disputing, however hasn’t there been massive investment costs since then ? So with Shipping, insurance etc this must be higher now.

        Here’s an old article, but it looks like raw production costs are what you have put forward, while their profit margin was around $100 in a market selling at $176 ….

        So this may very well be the exact line BHP were looking at when canning projects, the projected figure once Africa kicks in is around $80 a ton, factor in reduced demand as the Chinese super cycle of construction has finished this could be lower.