Iron ore is a huge Australian export to China. Vale with their outlook for iron ore
- Going forward on the year, on the supply side, volumes shall increase compared to 2H20
- while iron ore demand might be impacted by production cuts due to environmental restrictions in China
- Going forward, Chinese steel market is concerned about further policy restriction – given the good steel margins, mills will look to accelerate steel production before NDRC and MIIT capacity control policy materializes.
Add those two (supply up, demand down) together and some of the heat might be taken out of the price, and thus the AUD. Still, “going forward’ does not put a timeline on this outlook. And given increased production ahead of any restrictions on output, it looks like there is room to run higher beforehand.