After tensions between the Chinese Communist Party and Australia, tariff sanctions were offered. But Australia controls a major lifeline for China’s economic production: a source of up to 60 percent of its iron ore. China’s state planner, the National Development and Reform Commission (NDRC), said earlier that it would encourage companies to increase domestic exploration for iron ore, increase production, expand imported sources and explore overseas ore resources. However, in the opinion of experts, these put-downs are simply empty bombs.
I’ve visited more than 30 Chinese iron ore mines, notes Tim Murray, co-founder of equity and macro research firm J Capital. I’ve been underground. I’ve been to the biggest companies. So I’m very familiar with domestic iron ore capacity. The short answer is that domestic iron ore is not likely to replace imports. Definitely not in the short term.”
The Australian Financial Review reports that Chinese analysts and iron ore traders mostly agree with Murray, although they are afraid to speak explicitly for fear of their lives. Soaring iron ore prices have become a politically sensitive issue in China. While Beijing hopes to punish Canberra, China’s record steel production is supporting Australia’s economic growth.
Iron ore prices have soared from about $80 a tonne last April to a record-breaking $233.10 a tonne last week.
“A lot of Chinese mines have hit the wall, they’ve shut down, they just can’t compete,” said Shiro Armstrong, director of the Australian-Japanese Studies Centre at the Australian National University.
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