By admin 
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.
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 unimaginable proportions will take hold in seaborne iron ore.
The Trump administration’s policy mix adds another headwind to the commodity price outlook.
Tariffs, tax cuts and mass evictions of illegal workers are intensely inflationary policies.
Already, markets have repriced out many pre-election Federal Reserve rate cuts, which has helped put a rocket under the US dollar.
This acts as a severe financial headwind for commodities that are priced in the reserve currency.
It is also very damaging to emerging market growth prospects, as many are pegged to the US dollar or hold US dollar-denominated debt.
They are the largest consumers of commodities.
Depending on the speed and sequencing of the Trump policy rollout, there is probably more upside in the US dollar ahead.
Eventually, all of this will turn around as the US prices itself out and everybody else turns to stimulus as they are cut from US consumer demand.
But first comes the pain.
The other two commodities of size in Australia are gas and gold.
At the moment, the economy is lurching through an energy perma-shock owing to the East Coast gas export cartel.