Vale, BHP and RIO have eyes and ears on the ground in China for years. They know 30% of Chinese domestic production struggles to break even at $115-$120 per tonne.
At $100 per tonne, a huge slice of the domestic market would have to be mothballed if the current spot price persists for a matter of months. Only real demand shrinkage due to China experiencing a prolonged down turn can depress IO prices for long.
Unless China's economy tanks, the spot IO price will recover if destocking is the major driver for the IO spot price. I would suggest it is for economic weakness would flow through much more gradually in a gradual decline. What we have seen in spot IO price is more like turning off a tap.
If China's economy tanks, the debate isn't really about SDL anymore. The focus of interest is whether Australia will survive as we surely will enter into a mother of all recessions.
The other of course is when they roll out then tanks in Tiananman square again.
SDL Price at posting:
35.5¢ Sentiment: None Disclosure: Held
