Key producers BHP, Rio Tinto, Fortescue and Hancock were at an iron ore roundtable with the Prime Minister and Chinese steelmakers on decarbonisation in steelmaking.
The Shanghai forum was a “safe” sandbox for the Australian miners and their steelmaking customers to play in, where outside the room Albanese was trying to walk a fine line between caught between Donald Trump and keeping China onside, while managing a list of security headaches to discuss, including a tussle over the Port of Darwin.
Even flanked by Forrest, it allowed Albanese to keep the focus on business and trade as the main aim of his China visit.
Along with BHP’s Geraldine Slattery and Rio Tinto’s Kellie Parker, the forum was simply an excuse to keep communication channels open and the iron ore flowing into China during volatile times.
Their view is Chinese steelmakers are the ones best placed to make the transition to green steel, and Australia’s job is to deliver high-quality iron ore and in vast quantities. In other words, talk Australia up as a reliable supplier while betting on China making its own local investments into Pilbara-friendly low emission direct reduced iron (DRI) production.
Forrest is keen for more green steel processed in Australia, helped along by Australian taxpayer dollars, where he has ambitions for his own green hydrogen-based production of DRI, which can be sold to China.
Players like BHP contend it’s a 30 to 40-year journey for China to switch its steel mills over to producing a pure green product underpinned by the Pilbara-killing top-quality magnetite. But if China leads its investment on DRI this will keep Pilbara’s mines going for the long term.
Despite the differing views, the fact that the miners and Shanghai producers were sitting down together in an Australian and China-endorsed trade forum for the first time since the Covid pandemic sends a message about Australia’s biggest export despite the backdrop of an extremely uncertain global economy.
It helped that BHP forged side deals with China’s electric vehicle hero BYD and battery producer CATL to examine supplying commercial and light vehicles to mining sites, although an electric haul-truck remains a way off.
Afterwards Albanese described the Shanghai meeting as “successful”. The Chinese state media have so far been heaping praise on the PM, which helps to keep the steelmakers buying and puts him on a sound footing ahead of Tuesday’s visit to Beijing.
Green steel or not, it’s the pace of Chinese growth that really sets the agenda and Albanese’s visit comes as iron ore prices are again within reach of hitting the key $US100 a tonne barrier.
Iron ore futures traded at $US99.45 a tonne in Singapore, the highest level since the end of April. It comes on the back of recent falls in price as China sought to clamp down on oversupply given its own problems of a depressed property market, while Trump’s tariffs are adding to uncertainty.
Even at the height of uncertainty around where Trump’s tariffs are going to land, BHP chief executive Mike Henry, who spent some time in China earlier this year, recently told an investor forum there’s a “quiet confidence coming” out of China and was able to talk fluently about some of the green shoots in the economy.
Now the focus is over to Beijing where Albanese meets with Chinese Premier Xi Jinping to discuss trade, while a broader business roundtable organised by the Business Council of Australia gets underway. As well as the miners, the visit includes Macquarie boss Shemara Wikramanayake, Herbert Smith Feehills Kramer chair Rebecca Maslen-Stannage, BlueScope Steel chief executive Mark Vassella, and HSBC’s Australian chief Antony Shaw. Others attending include SunRice chief Paul Serra and ANZ’s Hong Kong-based International boss Simon Ireland.
CBA’s offshore backers
Commonwealth Bank’s well-documented record run doesn’t look so stellar when measured over the past three months, but the stock remains a hot property among offshore investors.
Smaller rival National Australia Bank has taken the attention of investors, outperforming CBA and substantially outperforming the broader S&P/ASX 200.
However, for bank investors, it is a marathon not a sprint, so those in CBA over the longer term are well ahead. Even over the past year, they are up 35 per cent.
Jarden analyst Matthew Wilson has been a long-time watcher of changes and flows in ownership across Australia’s big four bank stocks, and his latest look shows that CBA remains the hot stock among offshore institutional investors.
They now make up 25.5 per cent of shareholders, an all-time high for that stock, and up from 23.8 per cent over the year. This adds to the widely held view that non-fundamental, or passive, share flows have been driving CBA’s outperformance.
Overall, the change to CBA’s share register has been dramatic.
It took almost a decade for institutional investors (offshore and domestic) to move up from 45 per cent to 48 per cent at CBA. Then in the period since September 2023, it has rocketed from 48 per cent to 54 per cent, Wilson says.
Among other banks, NAB and Westpac are the most popular among domestic intuitional investors, while ANZ has the highest concentration of offshore ownership, reflecting its relatively bigger international footprint compared to Australia’s other banks. NAB has 61.1 per cent of institutional, while Westpac has nearly 59 per cent, according to the Jarden figures.
Retail investors, or smaller shareholders, remain net sellers of the banks, falling for six months in a row – particularly at CBA. Indeed, CBA, once dubbed “the people’s bank” following its privatisation during the 1990s, now has the lowest proportion of direct retail ownership, although, as Wilson points out, much of the ownership has transferred to superannuation funds.
Super funds now have around 30 per cent of Australia’s big bank, adding to the concentration of ownership.
Phil King, at Regal Funds, has previously expressed his frustration at what he called a bubble in passive investing in Australia, particularly from offshore.
“Passive investors don’t really care what share prices do. They won’t buy more when share prices get cheaper, but they do often buy more of the biggest stocks in the market when they have inflows,” King told a briefing last year. Regal has a high-profile short trade on CBA.
Since the start of the calendar year, Commonwealth Bank has outperformed the broader S&P/ASX 200 by more than 11 per cent, while NAB is up 3 per cent, ANZ up 2 per cent and Westpac has been flat.
Over the past three months (taking in a period in which CBA touched an all-time high and has since pulled back), the returns look a little different. CBA’s outperformance of the S&P/ASX 200 is just 2 per cent. NAB has outperformed by nearly 11 per cent, while both ANZ and Westpac have added around 2.5 per cent each over the broader market.
CBA hit a record high of $191.40 at the end of last month, giving the bank a $300bn market capitalisation. Shares have since drifted lower by more than 6 per cent.
Of course, NAB still has some way to go before being crowned one of the most expensive bank stocks in the world, but it’s starting to drift up. CBA is trading on an eye-watering price-to-earnings multiple of 27.6 times next year’s earnings. NAB is 16.7 times, Westpac is just over 16 times, while ANZ is a relative bargain at 13.3 times.
CBA’s next inflection point will be its full-year results, scheduled for August 13. Then Westpac, NAB and ANZ follow with quarterly updates a week later.
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