China’s trade war against Australia has met its Waterloo, the Australian iron ore sanctioned by China has risen, global iron ore prices have increased by about fifty percent compared to last year, while the price of rare earths, which China claims to limit exports, has been falling since April.
In the last two months, international iron ore prices have been negatively impacted by the relationship between China and Australia, as well as reduced production, and have continued to reach new highs. 2020 saw iron ore prices rise from 700 to 800 yuan per tonne to more than 1,200 yuan today, an increase of nearly 50%.
The steel industry is one of China’s key raw material industries, and real estate, automobiles, home appliances, machinery, and shipbuilding are all important downstream industries for the steel industry. The soaring steel prices have caused downstream enterprises to suffer a dramatic impact. Under the layers of transmission, the end market of some industries began to be under pressure.
There is a public opinion that from the macro environment in Australia, with the epidemic under control, companies in various countries are recovering their production capacity and the demand for steel has increased. However, the lack of capacity in Australia and Brazil, the main exporters of iron ore, has led to an oversupply of iron ore.
Feng Chongyi, professor of China Studies at the University of Technology Sydney, Australia, said in an interview with Radio Free Asia on Tuesday (18) that developed countries such as Japan, Europe and the United States have resumed production and the demand for iron ore has increased.
“Because their economic activity has basically resumed, the demand in this area has come back. But Brazil, a major exporter of iron ore, has not resumed exports and none of his companies can resume processing iron ore. Iron ore prices are influenced by supply and demand.”
In the first quarter of this year, Brazil’s Vale produced 68.045 million tons of iron ore, down 19.5 percent from a year earlier, and there was an oversupply, causing iron ore prices to soar.
China uses rare earths as a strategic material to bully foreign countries
However, while the price of iron ore is soaring, the price of rare earths and related products, which are dominant in China’s exports, is falling. The price of neodymium oxide, one of the most used rare earth products, for example, has reportedly fallen from a high of nearly 700,000 yuan per ton since March to more than 500,000 yuan today.
Scholar Feng Chongyi said that although China is rich in rare earth resources, when she uses rare earths as a strategic material to hold foreign countries hostage, foreign countries will choose to import rare earths from other countries, and the price of rare earths in China will fall: “The high cost of rare earth production, other countries such as Australia do not go to deliberately produce rare earths, but because after China used rare earths as a weapon against the West activated countries such as Australia, it replenished this market up. Developed countries have found alternative sources to China, so China’s rare earths have instead lifted stones and smashed their own feet.”
According to the U.S. Geological Survey 2015, the world’s rare earth reserves are 130 million tons, and China’s reserves are 55 million tons, ranking first in the world.
Chinese financial scholar Commander admitted to this station that the price of Australian iron ore exports and China’s rare earth price trend, forming the opposite trend, the reason for which is worth reflecting. He Commander said.
“should do a full reflection on this, and even the Chinese government should pay great attention to it. Although China’s rare earth industry occupies half of the world’s rare earth field, most of these enterprises are mountainous, with a large number of enterprises, all of which are small but not strong, and the quality of products is relatively poor.”
China has no say in the international pricing of rare earths
At present, the four major mines in Brazil and Australia monopolize more than half of the world’s iron ore. 2020, China imported a total of 1.17 billion tons of iron ore, 700 million tons of which came from Australia. However, when it comes to rare earths, in which China has a competitive advantage, there are no large enterprises operating.
Although China reportedly has almost a monopoly on rare earths worldwide, it has no say in the price. The Baotou Rare Earth Exchange, a national trading platform, has an annual turnover of only 1.33 billion RMB, or about 0.3 million tons. In contrast, in 2020, the market size of rare earths in China reaches 19.5 billion RMB, with a total output of 140,000 tons. The annual turnover of Baotou Rare Earth Exchange only accounts for less than 3% of China’s rare earth production.
On March 1 this year, Chinese Minister of Industry and Information Technology Xiao Yaqing said at a press conference at the State Information Office that China’s rare earths were not sold at the price of “rare” but at the price of “earth”.
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