China could slash its iron ore imports by 40 per cent as its Government winds down stimulus of an overpriced housing sector with disastrous consequences for Australian iron ore producers, a conference in Perth was told yesterday.
J Capital partner and iron ore and steel analyst Tim Murray said China’s annual iron ore imports could drop from about 1000 million tonnes now to about 600 million tonnes in as little as five years.
He said predicting such a quick demand was not a common view, but other research had predicted the same fall but over 10 years.
Mr Murray said the reduction in the volume of Chinese imports would also cause a very substantial drop in the price and hit Australia hard.
“Well we’re the biggest supplier to China, so we’ll be the biggest loser, its obvious,” he said.
Speaking on the sidelines of the Global Iron Ore and Steel Forecast Conference in Perth today Mr Murray said monetary stimulus had rapidly driven Chinese property prices beyond the reach of many buyers.
“The government is determined not to let property prices rise and has a very clear statement that houses are for living in, not for investment,” he said.
Mr Murray, who lived in China for 19 years, said flatter property prices would reduce construction, and therefore steel use.
He said infrastructure construction would not replace the steel demand destroyed in the property sector. It used less steel and in many areas China had enough infrastructure, and in some cases too much.
Mr Murray said importers would mainly feel the reduction in iron ore demand as most Chinese miners were State-owned and the country wanted to maintain a degree of self-sufficiency.
Another trend that will reduce Chinese iron ore consumption is the increasing amount of steel made from scrap using electric arc furnaces.
Mr Murray said this would take some time to have a significant effect as large amounts of scrap may not become available until buildings built in the early days of the property boom in the 1990s are scrapped.
By Peter Milne