If there is one lesson to be learned from a study of capitalism, it is that competition eventually finds a way of breaking through. Super profits do not go on forever. And while that day of reckoning may still be a long way off for Australia’s iron ore and coal industries, the headline from this morning’s China Dailyshould be seen as a salutary reminder.
The story quotes Chinese industry leaders saying rising domestic iron ore production and slowing steel demand have hit some foreign miners. China’s iron ore imports dropped for the third straight month to 47.2 million tons in June, while spot prices have dropped to about $122 per ton after peaking at $185 per ton in April.
Not that the Australian industry giant Rio Tinto seems to have any immediate concerns about the future of the iron ore market. Itannounced overnight that it is to invest a further $US790 million in its drive to expand the annual capacity of iron ore operations in the Pilbara to 330 million tonnes with the current annual capacity its Port Lambert loading facility going from 80 million tonnes to 180 million tonnes by 2016.
Figures on international trade from the Australian Bureau of Statistics this morning show that notwithstanding any supposed Chinese decline in their imports that the local exporters are having a boom time.
The increased prices for iron ore and the extra tonnages of coal resulted in the June trade surplus swelling to $A3.54 billion ($3.2 billion) from a revised $A1.83 billion in May.