Sydney: The unexpected slowdown in the Indian economy is creating ripples in Australia as a mining giant has expressed concern over the slackening iron ore demand from India.
The economic growth of the emerging South Asian powerhouse is, according to a Fairfax Press columnist, causing “concern far more important than Greece collapsing or the euro being scrapped”.
The top officials of the world’s biggest mining company BHP Billiton have implied in their recent speeches that India is not expected to repeat the rapid economic growth trajectory as experienced by China.
The BHP despair about the Indian demand for the Australian resources is also driven partly by the domestic iron ore production in that country.
The maturing of the Chinese market is also exerting cost pressures on the iron ore miners like the Melbourne-based mining giant.
BHP Billiton chief executive Marius Kloppers has gone to the extent of issuing a warning that the window is closing for new investment in the nation’s most valuable export.
The growing mining cost and slackening demand from the two major buyers China and India are the major reasons behind the iron ore prices dropping from record levels of $180 a tonne to about $135.
To make the scenario gloomier, the BHP projections point to the peaking of demand for seaborne iron ore in just over one decade.
“There is an opportunity set of about 650 million tonnes of iron ore for the seaborne producers before we reach peak demand,” Kloppers told an investors’ conference in Miami earlier this week.
“So while there is an opportunity for BHP Billiton and others, those that invest should do so knowing that supply in due course will meet demand,” the chief executive said.
The Australian economists and mining companies have been banking on a “Goldilocks scenario” that the commodities demand would continue to grow for decades and thus would fuel Australian economy for a long time to come.
It had been expected in not too distant past that Indian demand for Australian resources would pick up when the Chinese economy matures.
As the Chinese economy matures into a consumption phase, the demand for the resources required for massive construction drive like iron ore has fallen. The rapid industrialisation triggered by strong population growth in India has failed to take place and the slow pace of the Indian industrialisation has flattened the buoyant Australian spirits.
“For the world’s second-biggest nation on its way to becoming the most populous, it’s a tragedy of mammoth proportions, condemning most of that massive population to continue living in dire poverty,” Michael Pascoe wrote in his Sydney Morning Herald column Friday.
“Without industrialisation to provide jobs for the existing third of the nation living on a few cents a day, let alone the hundreds of millions more entering the workforce, there’s a bleak future that will test the nation’s already-stretched social fabric,” the columnist added.