China and the Broken BRICs

Off to Birmingham in an hour but I have had a request to clarify my statement on Middle East Oil producers budgets. I said in the last blog that they are spending wildly on social and infrastructure programmes, thus they need Oil at or above $90 to gain sufficient revenue. Well, here is a brief breakdown…Saudi Arabia brakes even at $88…UAE at $67 and Iraq at $93. Whilst this fall in Oil to approx. $87 may only be temporary, It will make them look at the level of spending. Just for information on the last time the US became a large Oil/Gas producer in the early to mid 80`s, the Oil price fell from $33 in 87 to $10 in 86…it did not regain its higher price for nearly 15 years. Think on!

Whilst I have you on the line…I stated in Chinese Deflation Cancer Spreads that China will start by slowing production at its Iron Ore and Coal mines but when push came to shove, employment is far more important than profit. I concluded that they will use tax advantages to protect its domestic miners…well, China has announced the re-implementation of import tariffs on Coal, having been suspended for ten years. This has sent miners in Australia on a downward path this morning. Whitehaven Coal for instance is 9% lower…Expect some movement on internal taxation of Iron Ore if prices remain weak. I have, on many occasions, highlighted the implications for mining equipment suppliers in the US and Sweden. This is not good news. I still think Jim O`Neill of Goldman Sachs was just lucky with the BRICs…And poor old Jim Thorpe would be turning in his grave…

TTFN…

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Friday, October 10th, 2014 BRICs, China, Steel

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