subject: U.s. Media: The Price China Has To Pay On The Issue Of Resources If It Remains Stubborn [print this page] In the decade-long time, the Chinese government has been anxious about that the idea the global market can not meet the Chinese demand for natural resources. Today, however, they are facing the opposite problem: traders are taking advantage of the abandoned warehouse, parking and granaries to store excessive iron ore, copper, coal and other metals and minerals. They buy these resources for the need of sustaining economic expansion. However, the sustaining economic expansion does not appear.
China is good at finding access to resources in the locations and times that the Western market economies are not good at. But it should not view this physical advantage as the intelligent advantage. Strictly speaking, the current oversupply does not merely indicate that inefficient Chinese mining industry has made more and more investment in overseas market. This also shows that the Chinese government almost stubbornly refuses to trust the market price of any product.
Iron ore is a simple example. According to report made by Reuters last month, at present, China's iron ore inventory is higher than its four-year average inventory by almost one-third. Since last month, the iron ore stocks declined slightly, but still there is a large surplus. Compared to what happened a few years ago, this is a major change. At that time, the Chinese government has also been troubled with high prices of iron ore.
BHP Billiton CEO Marius Crowe Perth has once assured the Chinese government that even if the old price negotiations alliance system rupture, in the global spot market, there will still be supply of iron ore. If China has ever thought carefully about this proposal, it might see an opportunity from a high current price. Over the years, planners are eager to promote the consolidation of Chinese steel industry, but with little success. Input prices are usually the driving force of development in this direction.
However, the Chinese government adopts a liberal credit policy to help iron and steel enterprises to ease the impact of iron ore prices and to maintain operations. Even if now excess of finished steel products is so serious that it is even likely to make the manufacturers collapse, the Chinese government still intends to invest $ 20 billion to build new steel plant in its latest stimulus plan.
Such being the case, it is believed that as long as China will not make any change of its attitude towards the resourced, the prices it has to pay will be higher and higher.
