On Tuesday on the Australian Stock Exchange, large iron ore miners drove prices to record highs.
This feat came about because of two factors. Iron ore is trading just off record highs and the Australian dollar is much lower than it ever has been during such previous booms. This has led to record fat margins for miners.
But, even as this trade hits new highs, there are clear signs that good times are on notice. Indeed, China is determined to crush iron ore prices in both the short-term and the long, and there are good reasons to conclude that it will succeed sooner rather than later. There are three reasons why.
The first is that global supply is lifting after several years of extreme tightness. The most important source is the rebound in Brazilian production which was badly damaged following its great dam collapse in 2019.
Brazilian exports are on the up and will be 60 million tonnes higher than the lows following the accident by the end of the year. Within 12 to 18 months, they’ll be fully repaired and running full tilt.