Markets have a way of correcting themselves.Lets say China...

Markets have a way of correcting themselves.

Lets say China boycotts Australian Iron Ore, two things are going to happen.

1. The price for Iron Ore inside China is going to sky rocket, raising the price of Iron Ore and steel in China even further than it is now, This would cause Brazil to divert all their shipments to China where they can sell at a higher price, and steel prices would rise meaning Chinese exports and production would drop.

2, The price for Iron Ore outside China would drop temporarily, but given that all of Brazil’s exports are now being diverted to the high priced Chinese market, all the other importers will now be wanting Australian Ore, and their steel profit margins and volumes of steel will rise because they are now more competitive than the Chinese exports, so Japan, Korea etc will be ramping up production.

this situation would be a severely negative effect on China and Australia, but as the markets balance out as described above the real loser would be China, as our volumes and prices would balance out at a level that is still viable for us long term.