“This is the start of the boom, not the end,” said Tribeca Global Natural Resources portfolio manager Ben Cleary.
“What China has announced is a material increase in efficiency targets, so smaller operators that are high carbon emitters will be closed in favour of state-owned enterprise operators running at scale,” he said. ”This will require more high-grade iron ore, which Australia supplies.”
And? Australia also supplies a lot of low-grade ore. Moreover, the greening of China includes other measures that will smash steel demand:
Falling commodity-intensive growth as quality overtakes quantity via a focus on value-added technology.
The specific targeting to real estate over-investment.
An ongoing push into scrap and green steel:
Urbanisation rate of change falling away relentlessly:
A few new windmills ain’t going to offset this.
To be clear, I’m not saying that all of this is imminent, and I expect strong pricing through to May and then again for a few months afterward before further price fall in September. But there is no doubt that the larger, greening China picture is immensely bearish for iron ore in the medium and long term.
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.
