ON the hustings and in his campaign ads, Kevin Rudd has been calling the mining boom over.
“The truth is in 2013 the China resources boom is over,” the Prime Minister said on July 11. At the leaders debate on Sunday: “The truth is, with the ending of the decade-long mining boom, we face new economic challenges.” At almost any media opportunity, the mantra is repeated. But he must have forgotten to tell the Chinese — the world’s biggest buyer of mineral commodities.
Ever since returning as PM on June 26, the price of iron ore — Australia’s biggest export by a big margin — has not looked back as Chinese steelmakers frantically restock on the expectation that while there is a slowdown in the country’s infrastructure and urbanisation boom, an economic growth rate of more than 7 per cent on an already greatly enlarged economy means it still needs to suck in vast amounts of the steelmaking raw material.
Iron ore has surged by 26 per cent, or $US29.80 a tonne, to $US142.80 a tonne since Mr Rudd returned to the Lodge and began mapping a re-election strategy that in part at least, links the claimed end to the mining boom to Australia’s ballooning budget deficits.
But iron ore has now moved back to five-month highs measured in US dollars. In Australian dollars, the current price of $156.27 a tonne is the best since October 2011. The local price is now up by $33 a tonne, or 28 per cent, which if sustained over a full year would add $20 billion to export revenues.
Copper and the rest of the metals complex have also moved up decisively in recent weeks, buoyed by the economic news out of China, the US and hopes of an improving Europe. Base and precious metal markets nevertheless remain volatile and well short of average prices achieved by the industry in the June half.
That has not been the case with iron ore’s stellar price performance — one achieved against a wall of naysayers who have predicted a price crash in the current second half as rising production in the Pilbara, Brazil and increasingly Africa outstrips demand.
In equity markets, the doom merchants continue to hold sway, giving Mr Rudd support on the halcyon days for iron ore being at an end. Atlas Iron is an example. The last time iron ore was trading at these levels, its share price was 75 per cent higher than yesterday’s market price, $1.01.
Atlas managing director Ken Brinsden said yesterday that the company fully expected that there would be volatility in iron ore prices. “But on average, we also expect we will continue to get a very good price for our iron ore,” Mr Brinsden said.
He said share prices not reflecting the current elevated iron ore price was a result of six to nine months of negativity around China’s economy that had “been feeding on itself”. And as for what Canberra has to say on the subject, Mr Brinsden said he had long argued that the outlook should be neither over-hyped nor understated. “The middle ground is best,” he said.
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