by, 12th-June-2009 at 05:36 PM (701 Views)
China's protests don't add up?
May be I am too cynical to embrace the arguments presented by this expert, it sounded a little too close to high school debate. For example, the argument that the new low cost production would surely mean good cheap supply to China and the other iron ore consumers; and that the premise and promise by RIO/BHP on their honour that they will sell the ore separately, etc... I can almost "visualise" the snickering from the Chinese when they read about this.
I am not sure if he still can remember the rapid rise of iron ore in the previous few years? I can't. I can only remember the last rise was 66% (offer from Vale) while BHP insisted a further 18%(?) to raise it to 84%? Does it sound like with a lower cost, BHP will be more generous this time? Well, never can tell, according to the argument presented, this is a very natural thing to happen and why not? (Let's have a group hug everyone! )
As a result of the steep rise in price, a few small Chinese steel mills were sent to the wall coz frankly not many profit making organisation can survive such vicious price rise consecutively over a few years.
With regard to shipping cost, etc... in the last few months, the Chinese have been spending big buying up cheap second hand ships around the world. If they are still at it, the amount should be exceeding billion by now. They are now a proud owner of not less than 70 over such ships and if I have to guess, these ships will be used to carry bulk commodities throughout the globe back to China. The point here is this - no one can really rule out they won't be cutting some kind of deal with Vale in retaliation to RIO (not Australia if the hints given were to be credible).
Anyway, to cut it short... I think it is very hard to argue with such logical and sensible arguments since by all accounts, the Chinese have been totally emo and irrational in their behaviour all these while. So let's assume when they come back to their senses, they can see why this RIO/BHP joint venture is a good thing for them.
And that goes for Japan too. Ha!
The score - exper:1, Haunting:0