China ought to take into account options for Australian iron ore as commerce tensions simmer, analyst says

Iron ore on railway wagons at Salanaha Bay Terminal in South Africa.

Training Photographs | UIG | Getty Photographs

SINGAPORE — As tensions between Australia and China proceed to simmer, Beijing wants to consider diversifying the provision of 1 key commodity from Down Beneath, based on an analyst.

Beijing imports 60% of its iron ore from Australia, and is closely depending on the commodity, which it makes use of to make metal. China is the world’s prime producer of metal.

Different Australian exports to China have been affected by the deteriorating relationship between the international locations, with Beijing hitting items corresponding to wine and barley with tariffs. Bilateral relations between Canberra and Beijing soured earlier this yr after Australia supported a growing call for an international inquiry into China’s dealing with of the coronavirus pandemic.

However Beijing has, to this point, spared iron ore from Australia, which analysts attributed to the shortage of options obtainable. Australia is the world’s largest iron ore producer.

Nonetheless, Peter O’Connor, senior analyst of metals and mining at funding agency Shaw and Companions, says that Beijing now wants to think about diversifying its provide of iron ore.

“That path or that narrative that we want to consider, that began a number of years in the past … was about range of provide. It is the place can China supply, how can they diversify away from Australia, additionally Brazil,” he advised CNBC’s “Avenue Indicators Asia” on Tuesday.

Brazil is the following largest provider of iron ore to China, however has its personal slate of points. In January 2019, a deadly dam disaster at a Vale iron ore site led the Brazilian mining big to halt manufacturing at ten places. Vale is the world’s second-largest iron ore producer, and its largest market can be China.

Following that accident, Brazil has struggled to get its iron ore exports again to 2018 ranges, stated Vivek Dhar, director of mining and vitality commodities analysis on the Commonwealth Financial institution of Australia.

Iron ore prices recently spiked as demand from China rose, and have been additional stoked by dwindling provide and disruptions attributable to storms hitting Australia. On the identical time, China’s financial system has largely recovered from the worst of the coronavirus hit, fueled partially by funneling stimulus into infrastructure.

One attainable supply of iron ore

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