Just three years ago federal and state governments were telling us that Australia was at the start of a 30+ year resources and mining boom. This was based primarily on China’s forecast requirement for resources boosted by world-wide demand and India’s economy coming on stream.
But then first America, quickly followed by Europe, and then the rest of the world, started cancelling huge orders with China for steel-based products such as ships and other steel materials. Then China’s internal requirements for steel-based products flattened.
Now we read that China’s 30 year resource-based boom is rapidly cooling off and, if the world does not pull out of the current economic doldrums (and there are no current signs it is going to), then the resources boom might go into hiatus for two or three years; or more. Both the quantities required of, and the prices being paid for, iron ore and other resources have nose dived and are not expected to recover any time soon.
Hence the headline in today’s (Tuesday) Australian Financial Review “Wary BHP reassesses its spending plan” with the opening paragraph “BHP Billiton chairman Jacques Nasser has told investors the company is re-evaluating its massive spending plans as slowing Chinese growth prompts a more cautious outlook for commodity demand”.