Is Joe Hockey ready to shape the global iron ore market?

Is Joe Hockey ready for what’s coming in the iron ore market? There are two questions of vital national interest building to a head, both pertaining to iron ore market structure: the parallel fates of Fortescue Metals Group (FMG) and Rio Tinto (RIO) which together represent some 475 million tonnes of seaborne iron ore production, roughly 30% of the seaborne market.

Fortescue Metals Group is now losing money hand-over-fist. Probably in the vicinity of $8 per tonne. It’s burning up cash and all things equal has 12-18 months of life left. The pain is suddenly showing up in a serious way in its bonds with 2019 maturity trading at 14.2%:

FMG should have taken that 9% refinancing a few weeks ago! The 2022 bond is plunging as well, now trading at 70 cents on the dollar:

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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.