Iron ore on railway wagons at the Salanaha Bay Terminal in South Africa.
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SINGAPORE – As tensions between Australia and China continue, Beijing needs to think about diversifying the supply of a key commodity from the Down Under, according to an analyst.
Beijing imports 60% of its iron ore from Australia, and is heavily dependent on the commodity it uses to make steel. China is the world’s top producer of steel.
China has been affected by deteriorating relations between other Australian export countries, with Beijing slapping goods such as wine and barley with tariffs. Bilateral relations between Canberra and Beijing soured earlier this year when Australia supported a growing call for an international investigation to deal with China of the coronovirus epidemic.
But Beijing has so far produced iron ore from Australia, which analysts attributed to the lack of available options. Australia is the world’s largest iron ore producer.
However, Peter O’Connor, senior analyst for metals and mining at investment firm Shaw & Partners, says Beijing now needs to consider diversifying its iron ore supply.
In CNBC’s “Street Signs Asia” he said, “The direction or the narrative we need to think about that started many years ago … was about the diversity of supplies. It was from China Sources, Australia , How to get away from Brazil. ” ” on Tuesday.
Brazil is the next largest supplier of iron ore to China, but has its own slate of issues. In January 2019, a deadly dam disaster at the Valle iron ore site led the Brazilian mining giant to halt production at ten locations. Vale is the world’s second largest iron ore producer, and its largest market is also China.
Since that crash, Brazil has struggled to regain its iron ore exports to 2018 levels, said Vivek Dhar, director of mining and energy commodities research at Commonwealth Bank of Australia.
Iron ore prices have recently increased in the form of demand from China, and this has been further halted in Australia due to dwindling supplies and disruptions caused by hurricanes. At the same time, China’s economy has largely recovered from the worst phase of coronovirus, fueled in part by funneling stimuli in infrastructure.
A potential source of iron ore