China's Retaliation vs. 'Trick' on Australian Iron Ore Sanctions

Chinese Media Reports Abnormal Signs in Australian Iron Ore Prices... Disruption in China's Steel Market
Pressure Tactics to Obtain Discounts on Iron Ore Prices

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The Chinese government is closely monitoring the recent sharp rise in prices of Australian iron ore, according to the Chinese state-run Global Times on the 11th. The media outlet claimed that Australian iron ore is not an exempted item from sanctions.

Since April, after the Australian government raised the issue of China’s responsibility for the novel coronavirus (COVID-19), China has been targeting Australia for economic retaliation. China has been pressuring Australia by imposing tariffs and other measures on major Australian exports such as barley, beef, timber, and wine.

The Global Times reported that last year, imports of Australian iron ore reached 660 million tons annually, accounting for more than 60% of total iron ore imports.

The Global Times further emphasized that with China’s iron ore demand increasing again, Australia’s expectation that there will be no sanctions on Australian iron ore is merely wishful thinking. This is interpreted as a warning against Australia’s optimistic outlook that the Chinese government cannot retaliate against Australian iron ore due to high dependency.

It also explained that with growing expectations for China’s economic recovery, iron ore prices have surged 50% compared to the beginning of the year.

In fact, the import price of Australian iron ore in China soared from $89 per ton at the end of last year to $145 per ton currently.

The Global Times cited a Chinese Steel Association official, who pointed out that Australian iron ore prices are showing abnormal signs deviating from the laws of supply and demand, which negatively affects China’s iron ore and related industries. The official added that the sharp rise in iron ore prices could cause market disruption, and in such cases, the Chinese government must step in to correct the disruptive behavior.

The Chinese Steel Association official said, "China’s crude steel production this year is expected to increase by only 10% compared to the previous year," adding, "Since there is no significant change in global iron ore supply, the sharp rise in Australian iron ore prices is abnormal." There is suspicion that Australia is deliberately raising iron ore prices to adversely affect China’s economy.

On the other hand, there is also analysis suggesting that the Chinese government may intend to exert influence on international iron ore prices by using the deterioration of political and diplomatic relations with Australia as a pretext. While Australian agricultural products have substitutes and can be retaliated against with tariffs, iron ore has no substitutes. Australian iron ore accounts for 60% of China’s total iron ore imports, with the remainder coming from Brazil. The volume is too large for retaliation, and diversifying imports is not easy.

Therefore, it is pointed out that the Chinese government may take actions such as import restrictions and customs clearance delays to induce discounts on Australian iron ore prices.

Meanwhile, the Chinese Ministry of Commerce announced in a notice the previous day that it will impose a provisional countervailing deposit of 6.3?6.4% on Australian wine. This is an additional tariff following the 212% anti-dumping duty. It is effectively a ban on Australian wine imports. China explained that Australian wine, which received export subsidies, has harmed China’s wine industry.

This content was produced with the assistance of AI translation services.