China’s boycott of Australian iron ore, resulting in high costs for China’s steel industry, in order to show the strength of a strong country, went to Guinea, West Africa to buy iron ore mining rights, as a result, the fastest until 2026-2028 to ship the first ton of iron ore. Analysts say that China will continue to rely on Australian iron ore in the next few years.
China claims to be experiencing rapid economic growth and strong demand for steel, but its resistance to the excellent quality of Australian iron ore has led to soaring iron ore prices, causing the steel industry to suffer. In order to achieve diversified sources of iron ore, the Chinese Ministry of Industry and Information Technology announced in early January this year to improve the self-sufficiency rate of iron ore, is expected to reach more than 45% of the domestic self-sufficiency rate of iron metal by 2025, the proportion of overseas equity iron ore accounted for more than 20% of imported ore.
According to the South China Morning Post, China, through Shandong Weiqiao and Chinalco, has acquired the large Simandou iron ore mine in Guinea, West Africa, which holds billions of tons of high-quality iron ore.
However, analysts warn that getting Simandou into operation will require building large production facilities and logistics, which will take time and will likely get bogged down, as most large mining projects do. Christie, an analyst at Wood Mackenzie, a global energy analyst, believes the first tonnage from Simandou will not be available until at least 2026 to 2028.
Christie said that despite the Guinean government’s claims to bring two northern mines into production around 2025, Africa is politically risky and requires significant capital expenditure, non-short-term solutions.
China is currently looking for new mines to reduce its dependence on Australia, according to Sean Davidson, chief executive of price reporting agency Davis Index, which is trying to increase steelmaking from scrap to get rid of some of its dependence on foreign iron ore. But even steelmaking from scrap will still require iron ore, and for high-quality steel, scrap mixed with pig iron (the intermediate product between iron ore and steel) is important.
Analyst Para Multimodal pointed out that China wants to diversify its iron ore sources without relying on Australia, and it seems that 100 million tons of iron ore could be squeezed out of Brazil’s Vale to replace Australia, plus a potential 300-350 million tons of replacement capacity, which is less than half of Australia’s supply. Some analysts have bluntly stated that China will have to continue to rely on Australian iron ore in the coming years.
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