China has been importing record amounts of iron ore, the key mineral used to make steel, as its economy recovers from the coronavirus pandemic – but much of the supply comes from Australia.
The Chinese government has vowed to hasten development of iron ore mines at home and abroad so its companies are less reliant on Australian exports.
China has been importing record amounts of iron ore, the key mineral used to make steel, as its economy grows after the coronavirus pandemic – and about 60 per cent of its supply comes from Australia.
With tensions rising between Canberra and Beijing, and iron ore prices soaring, the Chinese government wants to diversify its import markets.
Prime Minister Scott Morrison and Fortescue Metals chairman Andrew Forrest at an iron ore mine in the Pilbara, WA in April
China’s state planner, the National Development and Reform Commission, said China would step up domestic mines exploration and development of existing projects.
On Tuesday night spokesman Jin Xiandong said China is encouraging companies to ‘actively and prudently’ develop overseas iron ore mines while expanding import channels.
Since Scott Morrison called for an inquiry into coronavirus in April 2020, China has banned several Australian exports including coal, seafood, beef and barley, but has been unable to ditch Australian iron-ore because of a lack of alternatives.
Mines in number two exporter Brazil have been affected by Covid and natural disasters while India is only a marginal supplier.
China is exploring African projects in Algeria, Congo and Guinea but they will take several years to get up and running.
The limited supply and strong demand has pushed the iron-ore price towards $200 per tonne, providing a huge windfall for Aussie miners and the federal government which has benefitted from increased tax receipts.
Chinese President Xi Jinping (centre) in central China’s Henan Province on May 13
The profit has helped reduce the federal budget deficit from a forecast $213billion to $167billion.
In 2019-20, Australia exported $103 billion of iron ore, worth 22 per cent of the total value of the nation’s exports.
Iron-ore accounts for about half of Australia’s exports to China.
China’s state planner also said it was working together with the market regulator to look into the steel and iron ore market, where prices have soared 30-40 per cent in 2021.
Regulators in Shanghai and steel hub Tangshan warned local mills last week against price gouging, collusion and irregularities, and said they would shut down business at those seriously disrupting market orders.
A move earlier last week to raise trading limits and margin requirements for some iron ore contracts and reinstate fees on steel futures appeared to have no initial impact, as both contracts rallied to fresh record highs.
Iron ore from Australia is unloaded at Rizhao Port, one of China’s biggest ports for importing the commodity
Last week China threatened to bring ‘economic carnage’ upon Australia in response to big defence spending announced in Tuesday’s federal budget.
The federal government outlined a huge boost for the defence force, more funding for spies and help for exporters to find new markets in a massive push back against an increasingly assertive Beijing.
In response, Chinese newspaper the Global Times – a mouthpiece for the Communist Party government – has warned that Beijing will block more Australian exports after already banning a range of goods.
In an article titled ‘Canberra’s defence spending means more economic carnage’, the publication warned Australia’s natural gas exports could be next in the firing line.
The article referred to a report by Bloomberg that two Chinese gas importers were told not to buy from Australia next year.
‘While the authenticity of the report remains unclear and China is unlikely to issue export ban without justified reasons, it doesn’t mean China won’t seek diversification of LNG supplies,’ the editorial warned.
The federal government outlined a huge boost for the defence force, more funding for spies and help for exporters to find new markets in a massive push back against an increasingly assertive Beijing. Pictured: Soldiers at Australia’s school of infantry
‘In fact, considering the tensions between the two sides and Canberra’s reluctance to show even the slightest sign of willingness to repair bilateral ties, China’s diversification push may cover more products.’
Australia’s natural gas exports were worth a staggering $49billion in 2019, making Australia the largest exporter of LNG in the world.
The article accused the Morrison government of ‘further escalating regional confrontation by substantially increasing investment in defense and national security’.
It also said Australia was only doing this to act as an ‘attack dog’ for America’s ‘so-called Indo-Pacific strategy aiming to contain China.’
The article also accused Australia of ‘relentless and unreasonable provocations’ and warned of retaliation.
In an article titled ‘Canberra’s defence spending means more economic carnage’, the Global Times warned Australia’s natural gas exports could be next in the firing line