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28-11-2021, 08:23 PM
Tarric Brooker
November 27, 2021 - 12:55PM
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Australia finds itself in the unenviable position of not only being reliant on China for economic prosperity, but facing a potential double whammy should commodity prices fall.
This is part of what makes the woes facing the Chinese property development sector so concerning, particularly for Australia.
While it is likely it will be some time before the full effect of the downturn in the Chinese property sector is felt in Australia, there are signs that the impact could be quite severe if Beijing doesn’t step in and bail out the industry.
......
Based on the worst case scenario of a 30 per cent downturn in Chinese housing starts contained in that report, Chinese demand for iron ore would drop by around 12 per cent.
Given that in 2020 China accounted for over three-quarters of all global iron ore imports, the impact on iron ore prices and volumes would be significant.
Currently, iron ore exports are three times larger than any other export industry, followed by thermal and coking coal. A severe downturn would hit Australia right where it hurts – the Treasury’s bank balance.
......
Alternatives like exports to India or to the United States have been raised as a potential solution to the problem.
After the recent passing of US President Joe Biden’s $US1.2 trillion ($A1.67 trillion) infrastructure stimulus bill, there is the expectation that America will need a great deal of additional raw materials like iron ore and other bulk commodities.
Unfortunately for Australia, despite India being a growing economic powerhouse and the eventual increase in American bulk commodity demand, it’s all relative.
......
In 2019 India imported just 2.1 million tonnes of iron ore due to its large domestic supplies of the bulk commodity. In the US, imports were in a similar ballpark in 2019, recording 3.98 million tonnes of iron ore entering the States.
By contrast, China imported 1.17 billion tonnes of iron ore in 2020, including 712.4 million tonnes from Australia alone.
In a hypothetical scenario where both India and the US ramped up steel production by 10 per cent on 2020 levels, their total demand for iron ore would increase by 28.7 million tonnes and it’s possible much of this could be secured from domestic producers.
Meanwhile if a 15 per cent drop in Chinese housing starts was to be realised, total demand for iron ore would drop by over 100 million tonnes.
https://www.news.com.au/finance/business...5428332184
November 27, 2021 - 12:55PM
......
Australia finds itself in the unenviable position of not only being reliant on China for economic prosperity, but facing a potential double whammy should commodity prices fall.
This is part of what makes the woes facing the Chinese property development sector so concerning, particularly for Australia.
While it is likely it will be some time before the full effect of the downturn in the Chinese property sector is felt in Australia, there are signs that the impact could be quite severe if Beijing doesn’t step in and bail out the industry.
......
Based on the worst case scenario of a 30 per cent downturn in Chinese housing starts contained in that report, Chinese demand for iron ore would drop by around 12 per cent.
Given that in 2020 China accounted for over three-quarters of all global iron ore imports, the impact on iron ore prices and volumes would be significant.
Currently, iron ore exports are three times larger than any other export industry, followed by thermal and coking coal. A severe downturn would hit Australia right where it hurts – the Treasury’s bank balance.
......
Alternatives like exports to India or to the United States have been raised as a potential solution to the problem.
After the recent passing of US President Joe Biden’s $US1.2 trillion ($A1.67 trillion) infrastructure stimulus bill, there is the expectation that America will need a great deal of additional raw materials like iron ore and other bulk commodities.
Unfortunately for Australia, despite India being a growing economic powerhouse and the eventual increase in American bulk commodity demand, it’s all relative.
......
In 2019 India imported just 2.1 million tonnes of iron ore due to its large domestic supplies of the bulk commodity. In the US, imports were in a similar ballpark in 2019, recording 3.98 million tonnes of iron ore entering the States.
By contrast, China imported 1.17 billion tonnes of iron ore in 2020, including 712.4 million tonnes from Australia alone.
In a hypothetical scenario where both India and the US ramped up steel production by 10 per cent on 2020 levels, their total demand for iron ore would increase by 28.7 million tonnes and it’s possible much of this could be secured from domestic producers.
Meanwhile if a 15 per cent drop in Chinese housing starts was to be realised, total demand for iron ore would drop by over 100 million tonnes.
https://www.news.com.au/finance/business...5428332184
