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Chinese steel prices and consumption are both falling, with the news bad for both Australian iron ore producers and tax revenues.
The benchmark iron ore price dropped to an all-time-low of $US 44.10 yesterday, reports the Australian Financial Review. According to the president of the China Metallurgical Industry Planning Association, the property and infrastructure construction slump could shrink steel output by 2 per cent.
The CMIPA, which advises the government, also said steel consumption has already fallen by five per cent in the first half of the year.
Meanwhile, Platts has found wholesale white round cabbage to be more valuable than hot rolled coil in Shanghai.
The Sydney Morning Herald reports a local trader saying that he would be, "Better off going home to plow the fields rather than try to make money selling steel."
A sustained slump in demand for steel in China would cost Australia billions in tax revenue.
According to a budget “sensitivity analysis”, a current price for iron ore is about $10 below budget forecasts, if maintained, would see tax receipts $2.1 billion lower this year and $4.4 billion lower next year.