China’s aggressive move devastates Australian iron ore industry

China’s latest bullying tactic has decimated a multibillion-dollar industry in Australia in a devastating blow.

China’s latest bullying tactic has decimated Australia’s billion-dollar iron ore industry.

Earlier this week, a Chinese agency spooked iron ore companies around the world by accusing them of fabricating prices in a bid to ramp up the commodity’s value.

China’s National Development and Reform Commission (NDRC) and the State Administration for Market Regulation warned iron ore price information providers that they wouldn’t tolerate falsification.

“Related companies … should not fabricate or publish any false price information and should not drive up prices,” the statement said.

Bowing to the pressure, a Shanghai-based e-commerce company retracted an earlier release about iron ore shipments from Rio Tinto and Atlas, labelling it as unverified and “false information”, Reuters reported.

The perceived crackdown caused iron prices to plummet from a five-month high.

Prices in Singapore went from a $153 per ton high on Tuesday to just $144 a ton.

It’s a desperate measure to bring down iron ore prices, according to Michael Shoebridge, Director of Defence, Strategy and National Security at the Australian Strategic Policy Institute.

A haul truck is loaded by a digger with material from the pit at Rio Tinto Group's West Angelas iron ore mine in Pilbara, Australia. Iron ore suffered a huge drop in price this week. Picture: Ian Waldie/Bloomberg via Getty Images

China “knows that it can’t directly control iron ore prices and that Chinese steel producers are in internal competition against each other to get the iron ore they want,” Mr Shoebridge warned.

“That’s driving prices.

“Beijing also has no grounds for claiming the big iron ore producers are doing anything other than smart commercial negotiations on price.

“This leaves Beijing trying to use levers like pressuring third party firms who report and predict prices as a way of putting pressure on the industry.”

It’s not the first time the Asian superpower has tried to forcibly drive down prices for their own gain.

In May last year, China vowed to bring down the cost of the popular export because Australia was “profiteering” off excessive prices.

It planned to drive down costs and create economic “pain” for Australia by reducing demand from purchasing less in a nationwide five-year plan to cut its steel capacity by 236 million tonnes.

Then in December, the communist nation announced another zealous plan.

China plans to ramp up its own iron ore production so that it can cut off its reliance on Australia for good.

Documents show the CCP want to ramp up domestic production of iron ore by 30 per cent, alongside throwing money at overseas mines to increase China’s ownership in operations as well as pumping up recycling of steel scraps.

However, it’s not all bad news for Australia’s economy.

China's President Xi Jinping. Picture: Anthony Wallace – Pool/Getty Images

“The good news for Australian iron ore producers is that Chin’s economy still has no large scale alternatives to Australian supply,” Mr Shoebridge explained.

China produces more than one billion tonnes of steel a year, more than half of the global total, sitting at around 55 per cent.

Iron ore is a key component for the production of steel.

It’s not the only unofficial trade ban China has placed on the Australian economy in recent months.

Barley, beef, coal, copper, cotton, gas, lobster, sugar, timber, wheat, wine and wool have also been targeted since relations between Australia and China soured in 2020, after Australia called for a probe into the origins of Covid-19.

Australian Treasury estimates put the cost of Beijing’s sanctions at some $5.4 billion. But at least $4.4 billion of that was recovered through finding new markets.

Originally published as China’s aggressive move devastates Australian iron ore industry