As Beijing undertakes a significant commercial power push, China tightens its hold on Australia.
CHINA has tightened its hold on Australia, following a massive market power play that saw iron ore prices fall below $200 per tonne.
China “resents” its reliance on Australian iron ore, according to some experts, and is now using its market access as a “weapon.” For the first time since May, iron ore prices have fallen below $200 per tonne. Beijing has threatened to limit its orders as tensions between Australia and China escalate. Australia’s most valuable export is iron ore, which China relies heavily on.
Concerns that China is speeding up attempts to minimize its reliance on Australian iron ore caused the price to plummet by 3% to $195.
According to Chinese policymakers, Beijing is seeking to restrict steel production in the second half of this year, in part to reduce carbon emissions.
However, according to Vivek Dhar, Commonwealth Bank’s mining and energy economist, China’s transition away from its more than 50% reliance on Australian iron ore will be difficult in the near future.
“China might reduce its reliance on Australian iron ore in the medium term by increasing iron ore imports from other nations, increasing local iron ore supply, increasing scrap steel utilisation, and cutting steel output altogether,” Mr Dhar added.
“Regardless of Australia-China tensions, the last two measures are likely to be implemented.”
Iron ore is extremely important to Australia’s economy.
According to the Australian Treasury, the market’s worth will increase from $103 billion to $136 billion this financial year.
However, according to Michael Shoebridge, director of defence, strategy, and national security at the Australian Strategic Policy Institute, China is “very unhappy” with its iron ore supply constraints.
“I believe the Chinese government wants its steelmakers to diversify, but that is easier to say than to do,” Mr Shoebridge told news.com.au.
“They will try to use more domestic steel and iron ore, but the quality and nature of it is just a significant cost driver, and that is something the corporations don’t want to do because it undercuts their market position,” says the analyst.
“I can imagine the Chinese government attempting to impose collective pricing on their steel businesses, but they have had great difficulty doing so to date,” he continued.
“I believe global iron ore supplies will continue to increase.” Brinkwire Summary News