140MT 22 Projects Gone (Already), page-2

Hi Matt747,

Thumbs up for the article. I agree with most of it, and it re-enforces my recent posts.

What I don't agree with is that RIO's Silvergrass decision will affect IO hitting the market over the next 'few' years. RIO has already stated it's capacity expansion to 2017 remains unchanged. Silvergrass production would have come online after 2017 as it's a greenfield project.

What I do agree with is that there will be a supply deficit in the future. Some say 2018, others say 2020+. SDL itself predicts around this 2018-2020 time period. It's refreshing that you now agree with me (and 99% of analysts/IO industry participants including SDL) that there is a definite supply surplus which will continue for many years, and keep IO prices depressed.

I also agree with the statement that recent new capacity increases have made financing of new mines (even low cost ones) extremely challenging, with the projects being delayed or scrapped. Sounds very familiar to me.

I'm agreeing again with the comment that 95% of new supply over the next 5 years coming from Australia and Brazil. As I have continually stated, mining companies in these countries have already spent most of the CAPEX to bring this new production online. The production is locked in, it won't be cancelled. This guarantees IO over-supply for the next 3 years+.

I find myself again agreeing with the statement about the Chinese reducing taxes and tariffs on domestic IO production to keep those mines operating. Again as I have stated recently, it's in the best interests of the Chinese to keep their marginal mines in production as it will help keep IO over-supplied and prices depressed. Why wouldn't you prop up, for example, 100mt of domestic supply so that you can import 900mt of overseas supply 40-50% cheaper?

A good article apart from the Silvergrass analysis IMO.

Good luck!