No end in sight for China’s dependence on Australian iron ore

Summary

Australia supplies around 60% of the world's iron ore- approximately 900 million tons. It's an efficient industry, currently costing around USD 16 a ton to extract. China's mines break even at around $100; further, China's ores are generally of poor quality. Australian iron ore exports are at a record level due to China using its construction industry to drive consumption. China is keen to reduce dependence on Australia, but its options are limited as follows:

• The Simandou project (Guinea). Rio Tinto and a state-owned Chinese company,  Chinalco. But production is difficult and costly and only produces 100 million tons per annum.
• New mines in Algeria and Congo are under evaluation.

All of the above are unlikely to affect Australian Exports in the short term. Record prices are bringing big profits and increasing Australian government tax revenues. The main threat to Australian exports is a Chinese economy that is less dependent on construction.

References

• May 2021 9 News China's massive appetite for Australian iron ore shows no sign of ending
• Apr 2021 Mining Technology How China is moving beyond Australia for its iron ore hunger
• Mar 2021 South China Morning Post Australia’s iron ore exports to hit record US$104 billion as global steelmaking  recovers after coronavirus downturn