sp breaking to upside, page-35

Ok, to back up my IMO.

-Iron ore demand slowing in China(with tail risk of hard landing in China, or property meltdown). GDP coming in at "7.5%" (notice the quotation marks) but more likely to be closer to 7% in the words of some ministers. Pollution crackdown to hit steel mills. Command economy likely to keep IO mines in China open (even though they are uneconomical at these prices) to keep jobs on the board. China may even be at "peak steel" as they move away from 50%+ of GDP in infrastructure to a more service/consumer driven economy.
- Iron ore traders may have margin calls in the near term as prices fall a credit crunch starts biting in china.
- Massive deluge of supply coming online over the next year (will try and find some charts). Don't really need to go into this do I. Think Roy Hill, FMG, RIO, Vale, BHP all going bananas on ramp ups. I even read something the other day about an IO mine proposed in Victoria.
- For the first year in a long time supply will dramatically outstrip demand.
- This is the trouble with capital intensive industries. They are sticky to get going with huge CAPEX (so prices fly) and when prices are sky high supply ramps up like a mother (as we have seen in oz for the last 5 years or so) and then you get a sticky oversupply (not being able to shut down mines or stop production) so prices crash.

So those are some ramblings that explain my "IMO". I think the IO industry will see its year of reckoning this year or next and this does not bode well for the AUD, the terms of trade, the GDP of Aus, Aus property or GNI national incomes or just about any other Oz metric you would like.