China-Australia relations: breaking free of dependency on Australian iron ore would take years, but where is China looking?
- China has interests in overseas mines with tonnes of iron ore reserves, yet most of it remains inaccessible amid bureaucratic wrangling and limited capital
- Using more scrap steel is also an option for diversifying China’s iron ore supply, but this too is not without its hurdles and limitations
Brazilian port operator Grao Para Multimodal’s executive director, Paulo Salvador, knows there is plenty of untapped high-grade iron ore in northern Brazil, but a mix of bureaucracy and limited capital have stymied efforts to begin production for years.
Across the states of Para, Piaui and Tocantins, there are at least three mines amounting to nearly 10 billion tonnes of iron ore reserves ready for production, but they continue to sit idle, he said, adding that those deposits are only the tip of the iron ore iceberg in Brazil.
Late last year, iron ore prices reached nearly US$180 a tonne – a high not seen since 2011 during the post-credit-crisis recovery. In contrast, when China weathered an economic downturn in 2015, iron ore prices sank to as low as US$38 a tonne.
Given China’s relationship with Australia, I think that it would be interesting for China to have as many alternatives as possible
“The fact that there are no Chinese investors in mineral exploration in Brazil, in my view, is not related to any barrier, but because until now, they have not felt this need,” he said. “For years, the iron ore market was balanced in terms of supply and demand and, consequently, stable prices. With recent developments in both supply and demand, there needs to be a rebalance in the market.