Overview
The mining boom that fuelled growth over the last decade
and cushioned the economy from the worst of the Global Financial
Crisis has well and truly ended.
Increasing global supply coupled with a sharp slowdown in demand
from China has seen the iron ore price fall by over 50% to
US$63/tonne, its lowest level since 2009. Coal has also fallen
sharply and oil is 35% lower. The terms of trade are now expected
to fall by 13.5% in 2014/15, the largest decline since records
began in 1959.
Unfortunately lower prices are likely to stay this way for some
time. This is because China's residential construction boom,
the single largest consumer of steel, is beginning to unravel.
Property prices have begun to fall on the back of rampant
oversupply. As property developers fail, non-performing loans will
escalate, weighing on the banking system. A more pronounced
slowdown in China appears inevitable.
