Ore What?
CHINA says its steel industry cannot afford the 19 per cent price increase secured by Australian and Brazilian producers for shipments of iron ore in 2006-07.
The government-owned China Daily said the US dollar price rise - it follows a 71.5 per cent increase last year - could end the resources boom.
China has fast become the biggest market for Australian iron ore with an annual value of about $4 billion, making the health of the steel-making industry there a key consideration for the leading exporters, the Pilbara operators BHP Billiton and Rio Tinto.
“When over-capacity is looming in China’s steel industry, rising ore cost that further bites into domestic steel makers’ profits could turn the current boom into a bust and no one will benefit,” a China Daily editorial said.
And China’s Iron and Steel Association said its steel makers and their iron ore suppliers, including BHP and Rio, “still differ” on price and negotiations would continue.
Take a look through the China category. Market forces are pushing on the Chinese economy as never before. I said last week that Adam Smith doesn’t care a wit for who sits on the Peacock Throne. And that’s a fact, Jack!
One of the key indicators for the coming Chinese collapse is massive increases in their costs of imports. Both oil and iron have now done that. The really dangerous increase would be food, which has not happened as yet. The Chinese cannot sustain these costs for necessary commodities for long without increasing the trade deficit with the United States. That deficit has FALLEN for the last two months.
It won’t be Peking duck. It will be Duck! in Peking. Look for moves against Taiwan in the next eighteen months, and moves into the Russian Far East in the next two years or so.
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