2022 is now behind us.
Moving to 2023 and the ye
ars ahead I see many major economics factors favourable to stock markets and world economies and particularly iron ore demand.
1. China is re-opening after Covid. This economy is waking up again and will be THE GROWTH EMGINE of world economy again. China is desperate to revive its economy coming into 2023 and beyond. The implications is massive for the whole world economy. Massive!
2. Particularly China's housing and construction industry. Over the last few months China has been doing everything it can to revive its construction industry from cutting its bank's reserve ratios to abandoning its ban on its citizens buying 2nd house as investment property to allowing its central banks to buy up to $162bil bonds issued by its property construction companies. China is now reported to abandon its THREE RED LINE POLICY. This policy has been the ultimate reason that sent many of its giant property construction companies to near bankruptcy. All of these recent measures are to stimulate and to breathe life back to its housing and construction industry which consume around 30% of its annual total steel consumption. This alone will be a big boost to iron ore price.
3. India is now the world's largest population country with 1.45bil people and has been a sleeping giant in terms of economy and world's growth engine and it now has awaken. India is now the world's 3rd largest auto market. That is a giant steel consumption market and it is only going to get bigger and bigger as its population is switching to the most popular form of transport. This will require massive amount of infrastructure to support its fast expanding car and truck army from roads, bridges, to rails, ports, tunnels,...which will need massive amount of steel.
4. Vietnam (100mil population), Indonesia(280mil population), and other Asian economies are growing at breakneck speed. The amount of cons
truction in Vietnam is rapidly growing and it's economy has grown at crazy 8% in 2022. Together India, Vietnam, Indonesia are all growing at around average 7%-8% with combined population of around 1.83bil people. Adani group, Tata Steel are building more steel plants in India. World's 2nd largest steelmaker AcelorMittal together with Nippon Steel are expanding their existing steel production in India with their 2nd steel plant of USD $4.7bil to increase its annual production to 30mil tons in anticipation of increasing steel demand in India while POSCO is joining with a local steel producing conglomerate in Indonesia to spend USD $3.5bil to expand in their existing steel production to 10mil tons. Vietnam and India are going through exactly what China's economy went through 20-30 years ago and the associated super-commodity cycle. Vietnam population has been riding on bicycles and scooters for the past 50 years and they are now also switching to cars. And that means more steel consumption. Vietnam is looking to build a high speed rail system of USD $65bil price tag with the help of Japanese government. That is just the tip of the icebergs of so many construction projects in the country. Building activities in VN is so crazy at the moment and accelerating as many more multinational corporations are opening their factories in VN and office+apartment trends are shapping up in this country.
5. If you add India+Vietnam+Indonesia on top of China economy with combined population of 3.23bil people or 40% of the world's population, the combined economic effects expected in 2023 and the years ahead, I believe, will be very strong and the demand for steel consumption will be massive. Of course other nations in Asia are also ready to bounce back from the economic slow-down from Covid of the last few years. All in all it will be massive for steel demand.
6. European Union has finally passed the emission tax package and the emitters will have to pay carbon tax on their products imported to European Union countries. This will have major positive implications for high grade iron ore as producers of cars, trucks, components, machinery, and everything in between will have to rely on green steel or face hefty emission penalties. Hawsons project is in the league of highest grade iron ore products.
7. Zero emission, green steel, decarbonization theme will take a centre stage in 2023 and coming years as Ukraine-Russia conflict takes a backstage as Europe rides out its energy crisis and geopolitical issues. Take a look at POSCO. It is investing USD $14bil or close to AUD $20bil in new furnaces to produce low carbon steel. That is massive investment and it is just the begining as we see it has been involved in many other JVs in other countries.
Overall I think steel demand and iron ore prices are expected to perform well in the years ahead with extra attention paid to high grade ore as carbon tax is imminently enacted by the EU in the coming months.
What we need is a smart MD and his team to execute a smart strategy to bring Hawsons project to the attention of customers (steel makers and giant commodity trading houses) and JV partner(s) to bring Hawsons project to production. Either Bryan has to step up his game or step aside to let someone else with more energy, more ambition, and vision along with an active strategic thinking mind to bring Hawsons project forward.
Aaa
(20min delay)
