by Chris Becker
Much has been made not just here at MB, but everywhere of the 40% fall in iron ore prices this year at nearly 60% since their peak in 2011. Some noise, mainly from the Pascometer, has also been made that its nothing to worry about, given the huge increases in volume over the same period and it will all sort it self out in the long run.
But what does that dynamic actually look like?
David Scutt (follow him here on Twitter and his blog MarketScuttlebutt) has done exactly that with these 3 great charts.
First heres the massive change in volume in percentage terms:
Versus the change in price from the 2011 bubble peak:
Squished together we get the total $AUD value of exports:
Even with a slaughtered spot price, the rapid rise in volumes is indeed pushing the $AUD export value up significantly higher, although I note that the July value for this year is the same as that in July 2011.
This is a great addition to headline GDP and is one of many causes that give the consensus no fears or worries with their forecasts (Except the WA treasurer, who is shitting bricks).
Here’s the last piece of the puzzle – the monthly price of AUDUSD over the same period:
Note how the most valuable peak in exports occurred when the AUD was plumbing new lows in December last year. Pity we didn’t manage the dollar down a bit before then and – here’s a thought – stash some spare cash from the result.
Of course what is not shown on these charts is the profits and through-put of the spending on iron ore mining domestically, which adds to GDP. The former is 80% owned by foreigners, and the latter is now blowing up in real estate bubbles in places like Moranbah and Emerald, or in the budgets of States beholden to a speculative commodity.
None of it is sitting in an offshore wealth fund to cater for future emergencies or investments in the country’s future.