bhp value closer to 10 than 20, page-8

when someone says ' they can cure oversupply by stopping producing their 300Mpta' - i laugh and laugh and laugh

time to revisit our business 101 primer - ' the problem of fixed costs.'

AT THE SAME TIME
- in 2004 the world need 300Mtpa in raw steel - by 2012 China has made it 900Mtpa.

So China has led to a roughly 200% increase - of which you can fairly assume that - at normal rates a society of 1bn on a planet of 5bn probably only needs say equal to the other societies,

If it was 2004 that would mean 600Mtpa.

But there's progressive increase in all societies, so I would say 'normal' global raw steel demand is about 700Mtpa.

It takes 1.2mt of iron ore to produce 1Mt of pig iron - so that requires 840Mt of iron ore

So
vale - 510Mtpa from 2017
Rio - 370Mtpa from 2017?
Bhp - 295Mtpa
Fmg - 155Mtpa
then all the rest

1.33Bn tonnes of iron AT LEAST seeking to address a 840Mt demand.

I do expect China will remove some of its internal SOE production once Vale's expansion comes through.

But you will still see rampant oversupply

Unless China or India re-engages in a massive second round of construction - the global iron ore market will collapse in price the next 2 years

The supply will be so abundant there won;t be any 'bid' tension.

all alse being equal, costs will fall into the $us20s - to meet the marginal cost of production of the big 4.