Education Images | UIG | Getty Images
Beijing imports 60% of its iron ore from Australia and relies heavily on the raw material it uses to make steel. China is the world’s largest producer of steel.
Other Australian exports to China have been affected by the deterioration of relations between the countries, with Beijing hitting goods such as wine and barley with tariffs. Bilateral relations between Canberra and Beijing deteriorated earlier this year after Australia backed a growing call for an international inquiry into China’s handling of the coronavirus pandemic.
But Beijing has so far spared Australia’s iron ore, which analysts attribute to the lack of available alternatives. Australia is the world’s largest producer of iron ore.
“This direction or this story that we need to think about, that started several years ago… was about the diversity of supply. This is where China can source from, how can it diversify away from Australia, as well as Brazil, ”he told CNBC“ Street Signs Asia ”on Tuesday.
Brazil is China’s second-largest supplier of iron ore, but has its own list of problems. In January 2019, a deadly dam disaster at an iron ore site in Vale led the Brazilian mining giant to halt production at ten sites. Vale is the world’s second largest producer of iron ore and its largest market is also China.
As a result of the crash, Brazil struggled to bring its iron ore exports back to 2018 levels, said Vivek Dhar, director of mining and energy products research at the Commonwealth Bank of Australia.
Iron ore prices recently climbed due to increased demand in China, and were further fueled by lower supply and disruption from the storms that hit Australia. At the same time, the Chinese economy has largely recovered from the worst of the coronavirus attacks, fueled in part by the funneling of the stimulus to infrastructure.