Yujiapu Financial District - Estimation Question

I've written about Tianjin and the Yujiapu Financial District, still vacant.


How much iron ore and met coal did it take to build this financial center? How many dry bulk carriers would that have filled? How do those quantities of ore and coal compare to the output of a mine?

Some facts to work with: "the district comprises at least 47 skyscrapers", here's some architect's renderings of the city, "the district has 120 planned plots which will equate to a total construction mass of around 9.5 million sq m" [pdf], and a marketing pitchbook [pdf].

#Timestamp the Arrogant CEO of Cleveland-Cliffs Inc. $CLF

Sam D. Dubinsky: Great. Thanks. Thanks for taking my question. Just in Q3 looks like pricing was pretty good in the U.S., better than I thought based on where spot is. Was there any higher priced carryover tonnage from the first half? Just because I know there was some supply disruption that pushed H1 into Q3 a little bit? And then I have a couple follow ups.

C. Loureno Goncalves: Sam, I appreciate you saying thank you for taking your question, but I'm not going to answer your question, because you already knew everything about my company. You have a $4 price target and you think that we can't sell assets. So I'm going to take the next question. I'm not going to answer you. Next question, operator, please.

More From "Vienna Capitalist"

Another good post, about mining:

"According to Austrian Business Cycle Theory (ABCT), during a credit boom those sectors that are most removed from ultimate consumption benefit the most during a credit boom. Due to the long-term nature of these projects interest cost is a relevant cost component, which gets lowered during the boom and hence ignites heavy activity. Needles to say: these sectors also disproportionally fall during the slump.

Now, there are few things further removed from consumption than mining. The credit boom in this case is China’s lending binge and the most remote sector impacted by the binge is the mining industry, which provides the main input for all that steel that goes into the empty skyscrapers. And in Australia’s case the whole economy is a derivative of the mining boom. China is the main reason why there has not been a recession in Oz for the past 20 years – not some superior central bank management or 'growth model.'"

He's short AUD/USD.

"Goldman Proclaims the End of the Iron Age"

Source:

"The iron ore price has just hit a new 5-year low and Goldman is out with a piece in which they conclude that the 'end of the iron age' is near. Goldman basically states that we are shifting from an under supply phase in iron ore (2004-2014) to an oversupply phase which can be expected to last at least a decade. This comes as a result of the huge lags between investment and production – classic 'Schweinezyklus.'"

Quoting the GS piece, this amazing tidbit:

"On a per capita basis, the average household in China is accumulating steel at a rate equivalent to the purchase of a new car every 8 months (without disposing of its older cars)."

The Vienna Capitalist has an interesting theory about the damage that the Chinese "stimulus" did in terms of malinvestment.

"iron ore mining investment has really taken-off after the financial crisis, i.e. after we have already had books touting the commodity (around August 2008 oil hit USD 150/barrel) supercycle for half a decade. I can only speculate about why this is the case – long lead time for mine investments play a role for sure – but I think it also has to do with the fact that China’s investment binge really got out of control as a result of their huge stimulus program during the financial crisis."

Everyone thinks that we're at a "permanently high plateau" but the next crash is going to be big.

Iron Ore Bubble

The parabolic move started in 2004. It seems like a consequence of the China construction bubble, which ran out of steam a couple years ago. China is slowly being revealed as a fraudulent house of cards.

So what happens when the iron ore price retraces back down to historical levels, the way burst parabolic bubbles always do?

Let's look for some companies that are levered to iron ore/steel that trade in the U.S. and are optionable!:

Walter Energy - produces and exports metallurgical coal for the steel industry
Arch Coal - thermal and met coal
Peabody Energy - thermal and met coal
Cliffs Natural Resources - produces iron ore and metallurgical coal
Teck Resources - copper, met coal, other metals and minerals