More people live in Shanghai than Australia. Beijing is catching up. How’s that for world-changing?
But it is also worrying for investors in iron ore miners. Neither of these metropolises is likely to grow by 23.5m people (or one Oz population unit) hereafter. Much Chinese urbanisation has literally involved bits of Australia. Its red ore-rich dirt found a home inside steel skyscrapers. Still, it is hard to change the world twice. Mining majors hope that smaller Chinese cities get bigger. But they invested in supply much too quickly – and demand could fall before it rises.
Still, the majors will pull through. Despite the 32 per cent drop in spot prices so far during 2014, production costs for BHP Billiton and Rio Tinto, two Australian giants, lie well below spot’s $90 a tonne. Volume is the name of the game. But ore quality matters too. Spot prices reference 62 per cent high-grade haematite, often from BHP or Rio mines. This grade makes for environmentally friendlier steelmaking, and China wants cleaner, not just bigger, cities.