Did any go to the AGM?, page-35

How long will the likes of COK need to hold out?
From my experience, the price of Iron Ore and Metallurgical Coal are very much driven by perceptions of the Asian Steel Mill buyers. Iron Ore and Coal miners are price takers, not price makers. In times when Asian steel mills are under pressure to increase production, they can be very paranoid about getting their share of the best materials. When the steel mills are struggling to find a sale for all their steel production, they scale back and their buyers have the time and inclination to drive commodity price down until they have no choice but to do the deal for timing reasons.
So the real question is: "What caused the Asian steel demand growth to drop off"? A big factor was the relatively sudden drop in high rise housing developments in China, and the flattening out of general manufacturing. This situation was coupled with several large scale iron ore project announcements. Together killing any paranoia about supply. The actual global production levels of steel have not dropped off that much. It is the growth forecasts that have evaporated.
The reality is that there is technically no such thing as "over supply" Ships only get loaded if they have somewhere to go. Mines only mine if they have ships to fill. Iron Ore and coal never sits around looking for a home. What we do have is "over capacity".
So what is going to make the Iron Ore and Coal prices go up? Let's think in terms of what is going to make Steel Mills paranoid about supply?
1. A few cyclones or floods through the Bowen Basin and Pilbara wouldn't go astray.
2. Chinese stimulus with a steel production focus. (Not likely since they already have tens of thousands of high rise buildings sitting empty)
3. Non profitable mine closures. This is almost guaranteed and is happening as we speak.
So...how much time is needed for supply paranoia to set back in? We need some mine closures. RIO and BHP are doing their bit to speed up the process by lifting capacity. But then the lower AUD encourages the smaller Australian players to hang on at lower production levels.
Very rarely do unprofitable mines stay running longer than two years. Within two years I would think we will get a couple of good storm events. So I am thinking within two years for the paranoia. Meanwhile we need to dance around a few mine closures.
Cheers,
T.