Mark it down in your calendar: the commodities disaster of 2025 is coming. Australia is the meat in the sandwich in a war between superpowers, and commodities are the ketchup. China is wrestling with a structural crash in its principal commodity-demand sectors of property and infrastructure.
Meanwhile, the incoming Trump administration is going to drop a tariff bomb on Chinese exports, which include steel. All bets are off for commodity prices. Big trouble in big China The only Chinese commodity demand that matters in a macro sense to Australia is iron ore and coal.
Demand for both of these shrank in 2024, and it will get worse next year. Chinese steel output is falling at 2 to 3 per cent per annum like clockwork as its epochal property buildout winds down. Don’t be fooled by notions of stimulus turning it around.
It is over. Overpriced, overbuilt, and out of fashion in Beijing, which confronts decades of population shrinkage in the realms of hundreds of millions of people. Chinese steel has so far avoided an outright crisis by dumping excess steel production worldwide, but the pressure outlet will be steadily choked by US tariffs, which will spread elsewhere.
The Chinese steel price will have to keep falling in response, dragging iron ore coking down with it. We will see a pre-tariff bounce on front-running and some stimulus to offset the shock, but the risk of lower prices is extreme. Then, in late 2025, Simandou arrives, the Pilbara killer as it is known, and a glut of u.