Australia’s iron ore exports to China strong, but weak global demand indicates mixed coronavirus recovery
- Australian mining giant Rio Tinto reported a 3 per cent rise in total iron ore exports, largely due to stronger demand from China
- China requires more steel to help its push for more infrastructure construction, but recovery in demand from the likes of Japan and Europe has yet to begin
Australian iron ore exports to China surged in the first half of the year, as demand from steel mills rose to supply Beijing’s infrastructure building push to boost the coronavirus-hit economy.
Iron ore exports from Australia to the rest of the world, though, remained weak, reflecting the sharp differences in the pace of the recovery in major economies from the damage done by the coronavirus pandemic.
But while Chinese demand for iron ore has improved progressively since it reopened its economy in May, Rio Tinto cautioned in its first half report that recovery in demand around the world, such as in Japan and Europe, has “yet to begin meaningfully and is likely to be subdued when it does”.
There’s efficiency gains and less regulation. It’s a clear sign of China’s industrial production coming back
Alongside steady sales of seaborne iron ore to support longer-term contracts, Rio Tinto, the second-largest diversified miner in the world, gained 61 new customers for port-side trading. This new sales venture started in September last year, and allows buyers to acquire iron ore in smaller volumes with shorter lead times and smaller credit lines than seaborne trading, allowing steel producers to keep their inventories to a minimum but still restock on a just-in-time basis if demand rises.