Australia’s allegedly leading business column, so long as we ignore this one, has raised a juicy issue today. Chanticleer:
But the biggest signal that Stausholm intends to chase growth even harder is the 42 per cent increase in capital expenditure that Rio is forecasting from calendar 2023 to calendar 2024 and spending is set to jump from $US7 billion ($10.3 billion) to $US10 billion.
Of that, up to $US3 billion will be poured into growth. And there’s one project that’s moving from much-hyped prospect to reality: the Simandou iron ore project in Guinea.
…Rio is hiring and training locals, the partners have preparatory construction work under way, and infrastructure is being built.
“The project is going to happen,” Stausholm says.
OK, then. Let’s flesh out the question that Chanticleer is begging.
Why is Simandou being built when it is obvious that the Chinese growth period is over? Does the global seaborne iron ore market need another 100mt in 2025/6?
Like a hole in the head which is why I named it the “Pilbara klller” many years ago.
The arrival will crash prices lower than already crashed prices by then.
But that is a by-the-by. What matters more is the main purpose of Simandou. It is to provide China with backup iron ore if and when the war over Taiwan starts and Australian supplies are blockaded.
This will destroy RIO, so having some insurance for it is nice.
But is it nice for Australia?
Australia’s strategic leverage over China will be reduced. RIO’s Simandou iron ore will be shot back at Australian sailors. Perhaps even at Australia itself. China will be able to prosecute more war for longer.
It may be that the US will blockade the shipping routes from West Africa as well as our own. But that will necessarily make it a world war, so is it a good idea to let that develop as well?
RIO doesn’t care. It just wants to make a quick buck.
Maybe you should.
