There was a time when Japan kept Western military planners awake at night.
In his 1921 book Sea-Power in the Pacific – a Study of the American-Japanese Naval Problem, military author Hector Bywater wrote: “It is certain that no nation at present will put so much power into the hands of the United States. -a Study of the American-Japanese naval Problem), wrote: “It is certain that no nation at present spends so large a portion of its revenue on naval preparations.”
But Japan had a key weakness: a lack of steel.
In his book, Bywater notes:-“Since the end of World War I, Japanese shipbuilding has been severely hampered by the difficulty of obtaining steel.” The book accurately predicted the naval conflict between Imperial Japan and the United States 20 years later.
Japan had imported large quantities of American steel under a special agreement between the two governments until 1917, when the United States imposed an iron and steel embargo on Japan, preventing the flow of steel to the Asian country.
Bywater wrote: “The shortage became so severe that Japanese tonnage in 1920 was 25 percent less than the 800,000 tons forecast in January of that year.” “The shortage of steel had an impact on naval plans, delaying the launching and completion of ships.”
Communist state planners hoping to learn from history will soon note that the apparent weakness of today’s Chinese government is its dependence on Australian iron ore. Despite attempts by Beijing to push back against Canberra’s proposal for an international investigation into the root causes of COVID-19 (the Chinese Communist virus), it has been unable to escape the influence of Australian iron ore, which accounts for more than 60 percent of China’s imports.
As Australia deepens its ties with the US, Japan and India, creating a de facto anti-communist tag team in the Indo-Pacific region, Beijing finds itself increasingly uncomfortable being so dependent on Canberra for its iron ore. Iron ore is the basic raw material behind the Communist Party’s military buildup.
But Peter O’connor, senior analyst for metals and mining at Australian investment firm Shaw and Partners, says that dependence is likely to change by 2025.
O’connor told Nikkei Asia that “they are very serious” about diversifying their supply and pushing down the iron ore cost curve.
O’Connor said the CCP’s diversification drive is focused on Guinea, a poor but mineral-rich country in West Africa. The 110-kilometer-long Simandou mountain range is said to hold the world’s largest untapped reserves of high-quality iron ore.
Commodity watchers have known about Guinea’s potential for years, but a lack of infrastructure has hampered such development efforts. A railroad some 650 kilometers long would need to be built from scratch, as well as a modern port for transporting iron ore.
Cost calculations always discourage potential entrants, such as Rio Tinto, but the Chinese Communist government’s motivation for implementing the project goes beyond the return on investment, as it needs to avoid the fate of Japan in the early 20th century.
“Infrastructure is a function of time, money, willingness to invest and, more importantly, supply,” O’Connor said.
The Chinese Communist Party is building global railways through its Belt and Road Initiative, and there is no shortage of experience.
But what about funding?
O’Connor said China currently buys 1 billion to 1.1 billion tons of iron ore a year from third parties.
“For every $1 China reduces the long-term price of iron ore …… that’s $1 per ton multiplied by $1 billion, so that’s a savings of $1 billion per year.” “It’s not just about diversity, it’s about lowering the price. It’s not about the actual return on equity or return on capital invested, it’s more about the benefit of the long-term structure of the share price.”
According to the market view, the long-term trend will see iron ore prices fall to around $60 per tonne from the current level of around $160 per tonne.
The project to develop Simandou is divided into four blocks, with China holding a direct or indirect stake in each one. The area holds an estimated 2.4 billion tons of ore grading more than 65.5 percent.
“The mining of the Simandou iron ore reserves would transform the global market, making Guinea a major iron ore exporter along with Australia and Brazil,” Lauren Johnston, a researcher at the University of London’s Asia-Africa-China Institute, told Nikkei.
Johnston said that if the Chinese Communist Party releases its reserves of Simandou and drives down international iron ore prices, “selective commodity markets may be increasingly driven by internal dynamics in developing countries.”
The Chinese Communist Party will find it much easier to navigate these waters than to do business with Australia, a member of ASEAN.
Guinea is this year’s chair of the UN’s “Group of 77+ China” (G77+China). The group is made up of 134 developing countries and is a large voting bloc that the Chinese Communist Party can rely on. Guinea has been active in speaking on behalf of the group since assuming the presidency in January.
Johnston expects the CPC will be pleased if the Forum on China-Africa Cooperation is held in neighboring Senegal this year and talks in Simandou make progress. It is the first time the Beijing-led forum has been hosted by a West African country, and it is held every three years.
In what appears to reflect Beijing’s determination to make this project work, the Communist Party was quick to congratulate Guinea’s president, Alpha Conde, on his re-election in October, despite opposition accusations against him. Prior to that election, Conde amended the constitution to allow him to run for a third term.
Guinea became one of the first countries to receive vaccine aid from the Chinese Communist Party when the first batch of vaccines for Neocrown Pneumonia (a Chinese Communist virus) donated by the Chinese Communist Party arrived in the Guinean capital of Conakry on March 4.
According to Xinhua, Kaba said:I am confident that with China’s support, Guinea will be able to overcome the epidemic.”
The website of the Chinese Communist Embassy in Conakry shows that Huang is a frequent visitor to Kaba’s office.
“It’s not a coincidence,” O’Connor said. He said the Communist Party was “paving the way” for the development of Simandou, setting a fast-track 2025 timetable. “If you’re talking about Western producers in Australia or Brazil, that seems a bit far-fetched, but it’s entirely possible for the Chinese (Communist Party) to produce in that time frame.”
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