Will iron ore be dragged into the ongoing China-Australia trade conflict?


China sources two-thirds of its iron ore from Australia, with this supply making up half of all iron ore consumed in China.



Stephen Johnson, Economics Reporter For Daily Mail Australia 10 hrs ago

China’s trade sanctions are failing to cripple Australia’s economy, as Beijing’s insatiable demand for iron ore keeps prices at elevated levels for years to come.

Spot prices for the commodity, used to make steel, this month climbed above $US150 ($A200) for the first time since 2013.

As of Tuesday night, prices had climbed to $US176 ($A233) a ton or levels unseen since 2011 and exports to China have hit a new record high.

As recently as May iron ore, by far Australia’s biggest export, was worth just $US80 a metric ton.

Westpac has now updated its forecasts and is expecting the key commodity to remain as high as $US100 a ton by December 2022.

Justin Smirk, a senior economist with the bank, said China would continue making more steel during the next two years as governments around the world used construction and infrastructure programs to pump prime economies that had been savaged by Covid-19 lockdowns.

‘We may be nearing a peak in the momentum of Chinese growth but the pace is likely to be maintained until well into 2022,’ he said.

‘The balance of risks for commodities has clearly shifted with robust Chinese growth, global fiscal and monetary stimulus and ongoing supply constraints. 

‘We now expect commodity prices to remain well supported into the second half of 2021.’

China’s campaign against Australia is having little effect with annual exports to China in November just 0.4 per cent weaker compared with a year earlier, Australian Bureau of Statistics trade data released on Wednesday showed. 

Communist China sources 60 per cent of its iron ore from Australia as the other major producer Brazil continues to struggle following the Vale tailings dam collapse in early 2019.



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