- NEWS.COM.AU - MAY 22, 2021 - Hannah Paine - Contribuição César Tonheiro -
Tensions are at an all-time high but China is still dependant on Australia for one export — but there is one nation it hopes can end it.
China might have shunned Australian lobster and wine, but there’s one commodity it just can’t go without: iron ore.
The last 12 months has seen the country more dependant on Australia’s biggest export than ever before thanks to an increase in Chinese steel production, as well as disruptions to Indian and Brazilian iron ore supply.
Australian iron ore is now worth more than $US210 per tonne compared to just $US60 this time last year.
But the current boom in Aussie iron ore exports to China could be under threat with Beijing now pressuring Brazil to get its production of the commodity back to full speed, Australian Financial Review reports.
Brazil’s iron ore production has been impacted by a series of accidents and coronavirus-related shutdowns of the country’s biggest mines have hit the industry hard.
In mid-2020 some of the country’s biggest iron ore mines were closed after COVID-19 cases exploded among workers, who work in closer contact and more labour-intensive roles compared to overseas mines.
Meanwhile the iron ore price has skyrocketed. It was about (AUD) $271 a tonne today.
China is also pushing forward plans for an iron ore mine in Guinea to be built in the west African country’s Simandou mountain range.
The untapped resource, which spans 110 kilometres, is being touted by Beijing as one of the best ways to lessen its reliance on Australia’s iron ore supply. It’s a reliance that Beijing wants to end - quickly.
But both solutions have one downside Australia doesn’t: distance.
“You can’t tow west Africa or Brazil any closer to China,” one mining executive told the AFR.
China’s reliance on Australian iron ore — which has resulted in massive financial windfalls for our biggest mining companies — have come despite trade tensions between the two countries being at an all time high.
In a monthly briefing released this week, China’s National Development and Reform Commission (NDRC) called on companies to widen their sources of imports, look for overseas iron ore resources as well as increase domestic exploration for the steelmaking input.
According to Chinese state media, NDRC spokesman Jin Xiandong blamed Australia for damaging trade relations.
“Consequently, we have to make the legitimate and necessary reaction, and Australia should bear full responsibility for such moves,” Mr Jin told the conference.
“We urged the Australian side to treat China-Australian co-operation objectively and reasonably, to treat Chinese companies fairly, end the disruption of bilateral trade and investment co-operation and take actions to bring forward bilateral relations for healthy development.”
But despite Australia and China’s icy relationship, an outright ban on iron ore is “almost unimaginable”.
Instead Beijing could resort to other tactics to make the export of iron ore more difficult for Australia companies, energy research and consultancy firm Wood Mackenzie told Bloomberg earlier this month.
“While an outright ban would be almost unimaginable, various forms of restrictions, delays or increased administrative burdens on Australian iron ore imports could yet happen,” Wood Mackenzie warned.
Chinese steel production is at an all-time high, with the industry growing at 14.4 per cent on an annualised three-month basis, according to figures from Westpac and Bloomberg.
The country depends on our high-quality iron ore for around two-thirds of its imports and all but one of the biggest exporters to China are Australia mining companies.
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