With the iron-ore price down by almost a third this year, is there an opportunity
With the iron-ore price down by almost a third this year, is there an opportunity? Let's deal with the macro issues: 1) Projections suggest that by 2030 70% of Chinese will live in cities but the industrial capacity required to cope with this influx is already in place, lessening demand for iron-ore. 2) Chinese steel consumption is peaking and the country is burdened by vast overcapacity. 3) The amplifying steel boom took in iron-ore miners. They invested on the basis of endlessly soaring demand right at the time when demand is stalling. Rio has another 90mtpa to deliver in the next 18 months. Roy Hill will add 50mtpa next year. Vale will add 90mtpa the year after. These are unstoppable, sunk cost investments. The coking coal business, which has been through this process of rationalisation over the past two years, is an indicator of what happens next. (VIEW LINK)
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