Welcoming the world into the year 2021 was the news that China would accelerate its work on iron ore projects in Africa and Australia, a reminder of the country’s intention to bolster its own supply for steelmaking as well as its strength as an influencer on the global market.

Australia has long been China’s go-to for iron ore, with Australia’s vast iron ore production and the proximity of the two countries making for a productive relationship.

Australia is the largest source of feed for China’s steel mills, with around 60% of China’s iron ore imports originating from Australian mines. But ongoing tension between the countries have alarmed the iron ore and steel industry, with speculation over the future of the China-Australia iron ore trade.

Relations between Canberra and Beijing have been fraught since the initial onset of the Covid-19 pandemic in early 2020, with Australia’s policymakers calling for an independent investigation into the origins of the virus and China’s initial handling of the outbreak in Wuhan.

The response from China has involved effectively shutting Australian producers out of the Chinese market in certain industries. From slapping duties of 80.5% on Australian barley, suspending imports from beef suppliers, to banning timber imports from Australian states, China has constantly ramped up the pressure on the Australian Government over the past year.

Australia remains vital for China’s iron supply

A suggested response to China’s trade restrictions has been to stop sending Australian iron to China. It’s really the one export Australia has that China needs – for all its economic and political strength, the Chinese state will not easily replace 60% of its iron ore supply.

China’s other major supplier is Brazil, which has been struggling with Covid-19 infections in its mining sector, as well as high-profile mining accidents that have undermined confidence in the industry in recent years. Theoretically, Australia could deal a severe blow to China by withholding the iron ore it craves, and perhaps accelerate a resolution to the tensions.

But things are never simple. Australia, like many other countries, is still dealing with the economic effect of the pandemic. However far the war of words extends from Prime Minister Scott Morrison, Australia is unlikely to cut off a market worth tens of billions of dollars at a time when economic recoveries are only just beginning.

Despite the tensions, and despite China’s desire to move away from its reliance on Australia, the iron ore trade between the two countries is still booming.

Fonte: Mining Technology