The world's largest steelmaker, Baowu, recently warned its business was entering a "long and harsh winter", and it sent shivers through the iron ore market.
This process has a long way to go because the Chinese economy is structurally changing from construction to services.
Steel-intensive apartment buildings are the core of the change and the scale of downside ahead for construction volumes is enormous.
Construction starts by floor area have fallen by three-quarters. But the floor area under construction has only fallen 21 per cent.
The two will come into alignment over the next few years and construction demand for steel will collapse a lot more as they do.
Chinese construction by square metres.
Likewise, infrastructure investment in China is exhausted. All the quality projects are finished. Many subpar projects are complete too. All that is left are roads and bridges to nowhere.
Building these is bankrupting regional governments across China so their steel demand is waning as well.
Housing and infrastructure still comprise an astonishing 50-60 per cent of Chinese steel demand so new industries are not large of an offset.
A 2-3 per cent fall in Chinese steel demand is equivalent to about 30-50 million tonnes of iron ore. Supply chain inundated
Meeting this relentless slide in Chinese demand, a mistimed wall of supply comes on stream for the next three years.
Roughly 200 million tonnes of new iron ore is in the pipeline from Australia, Brazil and Africa.
Australia tracks this through the Office of the Chief Economist, which sees 36 million new tonnes next and 38 million tonnes the year after.
World trade in iron ore
But this does not include Simandou which will add 40 million tonnes every year from 2026 to 2028.
All told it is roughly 200 million tonnes of new iron ore coming over the next three years.
Rio Tinto's Simandou iron ore project in Guinea is due to start production in 2025. (Rio Tinto) The cost curve
Tallying demand and supply gives us a growing surplus of iron ore in the range of 300-400mt by 2028.
This is a preposterous glut that will never happen.
Instead, the price will fall fast enough to knock high-cost supply.
The price will need to fall to $50-60 for an extended period to shutter 300 million tonnes of iron ore supply.
But that assumes a steady state market, not one chock full of volatility and hysterical traders.
There is every chance that cyclical waves and weaknesses will trigger wild volatility so the price will fall well below this level at times. 'No save' for Australia
Australia has not experienced this scale of income shock since the 1980s when the great Japanese iron ore boom went bust.
We had a taste of it in 2015, but the price crash was brief and rescued by another round of Chinese building. This time around it will be relentless, as no save comes.
