Here is today’s iron ore complex chart, where the correction continues:
And the chart:
Still no spread compression, which tends to happen during decent corrections, so plenty more downside potential for spot.
Today’s news is the fightback offered by Fortescue’s CEO, Nev Power, yesterday. From The Australian:
FORTESCUE Metals Group chief executive Nev Power has backed China’s new leadership regime to continue moving the country along its economic growth path, with the urbanisation of its interior set to boost the country’s demand for Australian iron ore.
…”The new leadership of China is going to be focused on growth, but focused on growth with significant balance, and we won’t see the double-digit growth that we’ve seen in the past…But of course from a much bigger base number, numbers of 6 or 7 per cent (growth a year) still represent significant increases in the base number…It will be, I believe, that the central-western urbanisation of China and the completion of infrastructure to those provinces will drive steel demand,” he said.
Fair enough. Nobody here has suggested that Chinese urbanisation will cease. The question is, will it grow? Remember, with fixed asset investment growth, there has to be more of it each here, less won’t do, the same won’t do either. It’s got to be more. I would have thought that it’s pretty obvious that there’s a limit to such growth paradigms but what do I know? I will add that the Chinese push West started at the commencement of the last Five Year Plan, not the current one, which is all about rebalancing growth. It doesn’t matter if the growth increment is smaller on a larger base if the composition of the base is shifting to a smaller share for you.