Iron ore prices are finally catching up with China's economic slump
Despite all the gloom around China's slowing economy, iron ore prices had been holding up well. Is the bad news finally catching up?
If the most bearish predictions about China's economy prove accurate, and the most bullish hopes on African iron ore supply are realised, then prices of Australia's most lucrative export may be in line for a period of sustained weakness.
That would put pressure on major mining stocks such as BHP, Rio Tinto and Fortescue, and also leave a significant hole in the national finances just as the government faces its own pressure to open its wallet to reignite growth.
Australia’s economic prosperity – and the ability for federal governments to conjure budget surpluses – has been built on the back of strong iron ore prices. That, of course, has in large part been down to voracious Chinese demand.
It’s no secret, however, that the economy of Australia’s biggest customer is slowing. And that message appears to be finally getting through to investors.
