in todays australian

China expert Paul Galsson, from today's Australian

Why are iron ore prices rising so tremendously?

The answer isn't so much of a "why" as much as it is a "where." And that "where" is China, home to hundreds of new skyscrapers, thousands of buildings and a demand for the metal that has yet to be sated. Demand is so widespread that the leading producers of iron ore are considering buyouts and mergers, as to leverage prices with iron-ore hungry nations such as China.


China's steel output was up 15.7 per cent in 2007, to 489 million tonnes, four times that of Japan, the next biggest producer. And the China Iron and Steel Association forecast a further 10 per cent growth this year to 540 million tonnes. While this now appears over-optimistic, China is still on course to increase its production to exceed 500 million tonnes.
Mr Glasson said: "The panic in the markets indicates some people think Chinese demand is going to slump away to almost nothing. That's just nonsense. The Australian dollar is also an example of this - being sold off on the basis that commodities demand will diminish to unrealistic levels."

Reconstruction of Sichuan province following May's devastating earthquake will certainly continue, including the building of 4.5million new homes, 51,000km of roads and 12,000 schools. Other massive infrastructure projects will remain on track, such as the upgrading of China's national rail network and of power infrastructure.
The focus on such developments, absorbing considerable amounts of resources that Australia exports, including iron ore, will be reinforced by the need to deploy Chinese savings at home rather than investing them, more riskily, abroad.