Macro Investing: The coming iron ore glut

The iron ore price rose 15-fold in less than a decade. David Llewellyn-Smith explains the coming iron ore glut and what it means for your portfolio.

In early 2003, Australian iron ore was trading at $12.05 per tonne. Relations between Australia and the dominant buyer of iron ore, Japan, were cordial. Each year a meeting took place between miners and steel mills to negotiate an annual contract price for bulk iron ore shipments in the year ahead.

Against the backdrop of gleaming Tokyo skyscrapers, perhaps tea was shared during gentlemanly discussions. Either way, BHP Billiton and Rio Tinto made handsome profits.

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