The iron ore price, Power says, will continue to be volatile. But he expects it to stay roughly around the $ US 110 to $130 a tonne mark for the foreseeable future.
More importantly he argues the level of demand for Australian iron ore will be fundamentally underpinned by China's need for steel product currently running at around 2.2 million tonnes a day. According to Fortescue's view of the world, this elevated demand for steel will last for several decades. Power can not see anything, he says which would drive a major drop in the iron ore price. "China's journey through urbanization is only just the beginning," he insists.
And while China's 7.5 per cent growth rate may be well below that of several years ago, Power points to the fact the Chinese economy is much bigger.
He also dismisses as overblown the concern about China's "ghost cities" where speculative apartments and buildings lie empty. In an economy of such size and complexity, he argues it's not surprising to see a few "overshoots" in planning and mistiming of development. But Fortescue claims that of 658 cities only 12 suburbs can be labelled as ghost cities- underpopulated suburbs of third third and fourth tier cities. From FMG perspective, the overall outlook remains solid.
Today's Financial Review.
TRF Price at posting:
11.5¢ Sentiment: LT Buy Disclosure: Not Held
