Hi MJA, The Chinese have telegraphed for a while now that they are wanting to pull back property prices. It is actually a strategy for them, not an out of control economic situation.
When we look out to 2014 and beyond, it is very hard to see IO prices breakdown below the SDL $65 per ton level. (That would be a 70% crash in prices) Given they are one of the lowest cost producers (assuming they get up and going) then they will either be last man standing or more likely, the structure will pull back to around $100 pt level. If it becomes very uneconomical as an industry, we will se closures and supply decreases. That should put upward pressure on IO again.
The Chinese are long term planners and want to rid themselves of Rio, BHP and Vale price pressure. We should learn a bit from them re SDL - patience and huge rewards. Therein lies the lesson for us me thinks...
SDL Price at posting:
34.5¢ Sentiment: ST Buy Disclosure: Held
