China’s imports of Australian iron ore, the bellwether of the trading relationship between the two countries, fell nearly 3% last year as Beijing sought to reduce steel production and carbon emissions. Diplomatic ties have remained icy in recent years over a range of issues, including Australia’s push for probing the origins of Covid-19, but Australian exports to China – iron ore in particular – had cushioned a complete fall-out in the relationship. Exports peaked in 2020, when China fired up its post-Covid industrial recovery, before starting to slow. “We think exports of iron ore will continue to struggle in 2022 as China’s GDP growth remains subdued and the Chinese construction sector continues to struggle,” said Ben Udy from Capital Economics after the Australian Bureau of Statistics released new trade data. “This should also see prices of iron ore weaken this year, which will also weigh on export values to China,” he added.
Australia exported 694 million tons of iron ore to China in 2021, down from 713 million tons in 2020, according to the latest data from China Customs. Last year’s imports however remained higher than the volume in 2019 of 665 million tons. While China’s demand for iron ore had been strong for years amid continuous economic growth, last year, curbs to steel production, a pursuit of emissions reduction, a crackdown on the debt and growth in the property sector also known as the “three red lines”, and a power supply crunch, showed there were plenty of factors that could threaten the demand, and put major suppliers like Australia and Brazil on alert. China’s total iron ore imports last year – including the drop in Australian purchases – fell 3.4% to 1.13 billion tons, matching a lower steel output of 1.03 billion tons which fell from 1.065 billion tons the year before.
Navigate Commodities Managing Director Atilla Widnell said the latest news from China indicated declines in iron ore imports would be limited this year. “Iron ore imports were only a little lower, and the amount of stimulus and liquidity China is pumping in this year will result in roaring iron ore demand in the second half of the year,” Widnell said. Indeed, China has announced it would make industrial growth its top priority this year, and thus “erased requirements to cut steel output in its 2022 decarbonization policy”, commodities analyst S&P Global Platts said in a note, as reported by the South China Morning Post.
