Here's why everyone is saying the mining boom is over
Fri August 31, 2012 12:44pm
THERE is talk that the great Australian mining boom which has helped the country avoid recession for 21 years, is over. Here's what's happening
Resource Minister Martin Ferguson said last week that "anyone with half a brain" knows the resources boom is over. Deutsche Bank warned of the end of the investment boom and even a recession in 2013.
On the flip side, a NAB report predicts the resources investment boom isn’t over and will continue until 2013-2014 and perhaps will not peak until 2015. And, last week Reserve Bank governor Glenn Stevens took the "glass half full" outlook and said he sees no sign the boom is over.
It’s over, it’s not over, it’s over….
Here's a breakdown of what's happening:
The Iron ore bubble As far as bubbles go – this is one of the biggest and it looks like it’s about to burst.
The price of iron ore has increased tenfold over the past 10 years and it's Australia’s biggest export. But the price of the steel making ingredient has fallen 30 per cent in the past two months. Yesterday, iron ore prices hit a two-year low, nosediving $US4.50 to $US90.30 per tonne.
If the price doesn’t pick up the collapse threatens to put a big dent in Government revenues (to the tune of $10 billion) and mining incomes. Some analysts are saying the price won’t pick up any time soon. Others are optimistic however such as Fortescue Metals chief Neville Power who yesterday said he believes the price will go back up to $US120 a tonne – a mark for when Chinese production is profitable again.
So, we need China to step up spending on power, water, rail and road infrastructure programs.