mandag 24. mai 2021

Why China’s flex to hurt Australia could backfire

China’s efforts over the past week to cool down the skyrocketing price of Australia’s biggest export look as if they may have started to take some sort of effect. It’s still early days, but the price of iron ore dropped a further five per cent at the end of last week – after the Chinese government set forward a plan to tackle its continually rising price. The drop is already hitting Aussie mining companies on the ASX today. Rio Tinto fell 0.93 per cent to $122.12, while BHP declined 1.1 per cent to $47.75. However, the price of iron ore – a crucial ingredient in steel making and an economic lifeline for Australia – is still high amid huge demand around the globe.

This time last year it was worth about $US60 per tonne. At the end of last week, the same amount was worth over $US200. As nations look to recover from the pandemic by spending big on infrastructure, they need more steel. China is clearly aware of this, and has its own huge demand for steel. As a result it has increased its steel production to record levels – giving Australia a much-needed and surprising cash windfall at a time when relations between Canberra and Beijing have been significantly strained.

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