China is not only the world’s biggest iron ore importer but also the leading consumer of coal, gold, copper, crude oil and even rare earths.
Having one endlessly hungry customer has served Australia well but being dependent on the one avenue can also be dangerous.
China has long been viewed as a growing force, yet the country is proving to be a volatile one at that.
We’ve already seen the impact China’s unpredictability can have on Australia’s coal industry. The country ceased Australian coal imports indefinitely after Prime Minister Scott Morrison errantly called for an investigation into the origins of COVID-19 in 2020.
There are reports China has recommenced importing small amounts of Australian coal amid a national power crunch. The country has also been turning to Australian coal stockpiles to ease the shortage.
Australia’s iron ore industry has felt the pinch of China’s undulating economic thirst and unstable property sector, which came to a head at the end of 2021.
As China’s commodity demand continues to rise and fall, there’s never been a more important time for Australian producers to fortify ties elsewhere.
“All metal producers globally, not just in Australia, should be very wary about China and mining policies in China,” Fitch Solutions senior commodities analyst Sabrin Chowdhury told Australian Resources & Investment.
“China is the world’s largest consumer of metals and it’s the largest customer for Australia … so if Australia were to think about other suppliers and look to diversify, then maybe the risk would go down.”
Chowdhury believes that while there are towering demand highs, there are also too many uncertainties for Australian producers to solely put their eggs in the Chinese basket.
“Depending on China will definitely expose Australian miners to a lot of risk because policies are a bit erratic right now. With their zero-COVID policy, there could be lockdowns in cities any time and demand could fall when infrastructure projects are halted,” she said.
“Demand could also rise the next moment if the Chinese Government wants to influence stimulus measures. If there’s a huge boom in the infrastructure and construction sector … it would improve demand for commodities such as iron ore.
“China will remain volatile going forward. There are a lot of risks facing their economy and they have a number of issues going on which definitely will impact commodity demand.”
To diversify its customer base, Australia has held significant meetings with India and South Korea over the last 12 months.
The discussions saw Australia voice its critical minerals capability, while negotiations with India also looked to iron out issues relating to the country’s import of Australia’s coking coal.