supply and demand

We already know what world supply will be in 3 years time. Even with all projects in Africa likely to not proceed, world IO prod is still rising at a rapid pace. Anglo too far committed into their Brazil project to pull-out and VALE, BHP, FMG along with RIO accelerating prod till at least 2016. The cash has been committed and projects well underway. It's already having an effect on IO prices and i doubt the fall over past 2-3 months has bottomed. Imagine if Indian Govt had not unilaterally banned IO exports to China mid last year!! Yes, the 300million tons produced by Chinese mines is uneconomic at $100/ton... but that 300m is rapidly being substituted by increased world production. Hence if the Chinese govt allow the IO mines in China to close... which for social and strategic reasons makes this unlikely.... then the shortfall is being taken care of by increases in Oz and Brazilian exports. We're facing a surplus in IO prod imo. What would help Aussie mines is a fall in AUD. But it would need to be significant.

Demand is harder to estimate. Nevertheless, I can't see the demand/requirement for steel around the world rising more than a few % above current level. Who is likely to suddenly require a lot more steel? India has banned exports so doesn't need to buy IO from Oz. I can't see Japan, Russia, Europe or USA suddenly building huge skyscrapers or railway tracks to nowhere. About 80% of the growth in steel demand over past 10 years has been from China. i can't see how one country can continue to absorb the huge rises in IO coming onto the mkt over next 3-4 years. This excess supply has direct bearing on the IO price.

On other FMG threads some posts talk of SP being $8 within a couple of years. i can't foresee that.