The Rising Influence of Rising Affluence

[Democritus_of_Abdera]

Re: Iron-ore producers as sucker long-term investments...

Dew, I have worried about future overcapacity since it seems that all the iron ore producers are increasing their operations... But, I currently feel that overcapacity, if it does indeed develop, will not occur until the 2014-2015 time-frame... too far away to affect my current investment decisions. Note these are gut feelings. I have not yet spent much time studying the details of projected iron ore supply and demand 2-3 years hence. But it is something that I think that I should do before long.

There was a related question in Cliff’s “Dividend-CC” last Wednesday. The answer was somewhat garbled, but the bottom line was that they think that over-capacity might be checked somewhat by its cost (consistent with your comments); i.e.

Timna Tanners (Bank of America Merrill Lynch):
So to follow up with that, can you give us any sense of maybe your assumptions in terms of global steel production, Chinese steel production, iron ore prices, or anything that bakes into those analyses that you talked about?

Laurie Brlas (CLF CFO):
I would say that we’ve got an assumption that we’ve got a pretty strong belief in the growth of China over the next period of time, and we’re comfortable with that. I think that we...

Joseph Carrabba (CLF CEO):
I think we’re also, Laurie, if I may, Timna – we’re again comfortable on what we see in China growth, even at the cooling of 7.5% that we talked about. There is I think a gap on the supply side. We still don’t see the demand coming on for the next few years of any significant amount in any of the projects around the year – around the world rather. So we still see that gap in supply and demand from both Chinese demand, even at 7.5%. But I think more importantly, supply is just not coming on, and it’s going to come on very, very expensive.