But the announcement, which comes days after China announced stiff new tariffs on Australian barley, is also being seen by some market insiders as as a “subtle message” to Australia, which supplies more than 60 per cent of China’s iron ore as the world’s largest iron ore producer. Diplomatic tensions have been rising between Beijing and Canberra since the Morrison government started seeking a global inquiry into the origins of the coronavirus pandemic.
“Everything has a purpose,” Mr Lawcock said. “This is trade negotiation, and each side is going to send messages.”
Everything has a purpose. This is trade negotiation, and each side is going to send messages.
UBS mining analyst Glyn Lawcock
Chinese state-run media this week warned the trade friction between the two countries could spill over into the iron ore trade, quoting Yu Lei, a chief research fellow at Liaocheng University, who called the customs reforms an “implicit warning” “It is associated with how Australia has acted, and a general decline in demand for steel on the global level,” he is quoted as saying in the Global Times.
Federal Trade Minister Simon Birmingham said Australia remained committed to the “smooth facilitation” of mutually beneficial trade relations between Australia and China,
“We welcome any improvements in administrative arrangements that could streamline the customs clearance of iron ore imports,” he said.
“Such easing of administrative barriers and costs would be a positive example of the further opening of Chinese markets that President Xi has previously committed to, as well as a reform that can help with global economic recovery.”
The Minerals Council of Australia, representing the nation’s biggest miners, said the streamlining of iron ore testing was a “positive outcome” for Australian miners such as BHP, Rio Tinto and Fortescue, which suppled the bulk of China’s iron ore demand.
“These reforms will enhance this valued business partnership,” Minerals Council chief executive Tania Constable said.
“Australia’s iron ore miners have been the leading suppliers to China’s steel industry this year and supported its post-COVID economic recovery.”
Australia’s relations with China have been under strain since the Morrison government began seeking an inquiry into the coronavirus outbreak’s origins. China, which has already banned beef from four Australian abattoirs, has announced an 80 per cent tariff on Australian barley and there have been suggestions in Chinese state media in the past week the friction could spill over into the trade of Australia’s most lucrative export, iron ore.
However, curtailed production elsewhere in the world due to rising COVID-19 outbreaks and strong demand from Chinese steelmakers have quelled market concerns, with the iron ore price surging 10 per cent since May 1. boosting the fortunes of major Australian miners including BHP, Rio Tinto and Fortescue Metals Group .
Industry analysts said iron ore output in Brazil, the biggest supplier outside of Australia, remained weak amid rising coronavirus infections, and the global seaborne iron ore market was expected to remain tight, meaning the Chinese government would struggle to substitute Australian iron ore if it wanted to.
Business reporter for The Age and Sydney Morning Herald.