China will never cut off Aussie iron ore. But the US will

Let’s get a few things straight. In recent times we’ve seen a swag of analysts and apologists grabbing at the pearls as they worry that “China will cut off Australian iron ore”. Some are even contending that the recent slow disembarkation at Chinese ports is evidence of such, even though delays have hit ships from all nations.

Rest easy. The CCP cannot limit Australian iron ore, let alone cut it off. To do the first would be to hand untold riches to Australian miners as the price immediately doubled and tripled. To cut it off would send the price above $1000 per tonne and bankrupt Chinese steel mills, derail the Chinese economy, and threaten the very existence of the CCP as it lost access to its stimulus lever, the fulcrum of its political legitimacy.

Sure, long term, China will demolish the iron ore price anyway. As its economy sinks into the middle-income trap and by 2030 stops growing at all. It will help fund new supply as well. So $20-30  iron ore is inevitable in the long term.

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