A ban on Australian iron ore supplies to China, similar to those imposed on global coal markets, is highly unlikely. China has a strategic view of the Australian market in the current context. Australia will take advantage of this opportunity due to the lower profit margins of Australian iron ore compared to other markets. We see that the Chinese government has imposed heavy taxes and fines on the import of all steel products, but in the current situation, it has exempted the Australian market from these heavy fines. This shows a strategic decision in China. In the following, we will interpret this issue from the language of Metal Bulletin. Please accompany Artan Press to the end.
*** China’s attention to Australian iron ore
“The Chinese really can’t work without Australian iron ore. There’s simply nothing,” Joseph Pouromo, president of Raw Materials & Ironmaking Global Consulting, told participants in a briefing on Steel Industry Success Strategies 2021 on Wednesday, June 23. “There is no way to compensate.” “China will invest directly in iron ore from Australia in the short and medium term. Interestingly, China banned imports of Australian coal in October. This was a good excuse to stop imports because of the Corona pandemic,” he said. But in the current situation, it does not take its eyes off the Australian iron ore market, while the strictures related to the import of other products remain in force, according to the latest Chinese import statistics, from January to May this year due to The ban does not import coke from Australia.
*** Diversify the structure of China’s iron ore supply chain
China seeks to diversify its iron ore market through its iron ore supply chain channels, for example by investing in iron ore projects in Africa – such as Simando Guinea, the world’s largest potential iron ore mine – to gain an advantage. It is competitive in this area. The Chinese are well aware of the challenge of the steel market. Iron ore and raw materials will have a more stressful market in the next ten years than gold and ornamental stones. This is something that the Chinese have well planned for the future.
*** Chinese entry into daring iron ore projects
The Chinese entry into the Simando project is a big, bold investment, but it could vaccinate the Chinese government in future crises in the steel industry. China is currently spending heavily on its infrastructure. Due to China’s proximity to Australia and the speed of trade, this is a great option to offset the iron ore deficit in the Chinese market. China is rapidly expanding its infrastructure, which could change the future of the global steel market.
*** Assess the cost of Australian iron ore for the Chinese
Iron ore prices have risen this year. The Fastmarkets daily index for fines of 62% iron ore, cfr Qingdao, was calculated at $ 216.45 per tonne on June 25, more than double the $ 103.34 per tonne a year earlier. With this heavy fine, the Chinese government has emptied the market of international trade. But it cannot easily cross Australian iron ore. There is definitely a huge benefit to the Chinese government in this deal. On this account, the price of Australian iron ore for the Chinese is almost 15% lower than the prices in the world markets.
*** One roof and two Chinese airs regarding the pollution of the steel industry
China is currently using the issue of environmental pollution as an excuse. At present, despite high pollution, the iron ore sector is safe from the sharp eyes of the Chinese government, and this issue has been somehow predicted. This shows that the Chinese government’s environmental concerns are merely a propaganda show. This can be seen from the distribution of tax penalties in the Chinese steel market. Meanwhile, high-grade iron ore pellets, which are needed to support direct reduction iron production and molten iron – both major levers for decarbonization – must remain in sufficient supply. But at the moment, there is no news about the sources of these two substances.
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