China-Australia relations: iron ore price surges amid strong demand and souring ties

The price of iron ore – a key raw material in steelmaking – has risen to the highest level since March 2013, according to the China Iron and Steel Association

The strained relationship between Beijing and Canberra is adding concerns that bilateral iron ore trade could be disrupted

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Ships wait to be loaded with iron ore at Port Hedland in the Pilbara region of Western Australia. Photo: Reuters

Published: 5:00pm, 9 Dec 2020Updated: 4:56pm, 11 Dec 2020

Strong demand from steel plants and growing concerns over a worsening relationship between China and Australia have helped send the price of iron ore to its highest point in nearly eight years, while forcing Chinese regulators to step in to curb speculation.

According to a price index from the China Iron and Steel Association, the price of iron ore, which is a key raw material in steelmaking, has risen to the highest level since March 2013. It has surged 50 per cent since the beginning of this year.

As the bulk of China’s iron ore supply is imported from Australia and Brazil – Australia supplies about 60 per cent of China’s iron ore – the souring relationship between Beijing and Canberra is adding concerns that bilateral iron ore trade could be disrupted. For now, the iron ore trade remains normal, and there is no sign that Beijing will restrict Australian iron ore imports as it has with Australian wine, coal and timber.

“China-Australia trade disputes have recently intensified market concerns about the iron ore supply from Australia. Given the strong domestic demand, and the recovery of international steel industry production, overseas prices of iron ore have risen significantly,” an article published by state-run Futures Daily said on Tuesday.

As of Monday, the price of imported iron ore has surged above US$142 per tonne, up more than 55 per cent from the beginning of this year, according to the association. In the first week of December, the price rose about 10 per cent. Last year, China imported more than 1 billion tonnes of iron ore to meet the overall domestic demand of 1.2 billion tonnes.