On the morning of May 6, 2021, the national development and Reform Commission issued the statement of the national development and Reform Commission on indefinite suspension of all activities under the China Australia strategic economic dialogue mechanism.
The statement proposed that based on the current attitude of the Australian federal government towards China Australia cooperation, the national development and Reform Commission decided to suspend all activities under the telephone system of China Australia
strategic economy jointly led by the national development and Reform Commission and relevant departments of the Australian federal government indefinitely from now on.
As soon as this news came out, the iron ore futures price rose by 6.81%. As we
all know, Australia is the main importer of China's high-grade iron ore. China's dependence on the import of Australian iron ore has reached 70%. Under the background of rising bulk commodities, iron ore has risen to an all-time high. Are there advantages
or disadvantages for the iron and steel industry?
First of all, since last year, the price of iron ore has been rising due to the printing of money by the United States. As the world's largest iron ore exporter, Australia has naturally become the
biggest winner of this wave of iron ore price rise. However, on April 29, China announced that it would cancel the export tax rebate of some steel products. This means that China will vigorously limit the steel production capacity and output, and will
certainly hit the demand for iron ore. of course, this is from the medium and long-term effect. Since the market has digested the expectations before, it has little impact in the short term. The price rise of iron ore in the short term is completely predictable.
Secondly, from the production reduction in Tangshan and Handan from March to April, the output has not continued. To complete the task of reducing output throughout the year, measures may be introduced. From this point of view, the supply and demand
in May is still in tight balance, and the price may reach a new high.
Therefore, the price increase of iron ore triggered by the current suspension of China Australia economic dialogue forms a strong game with the domestic production restriction policy. Although both are boosting the rise of steel prices, if the
production restriction is strong enough to restrain the demand for iron ore to a certain extent, the foreign trade pattern between Australia and China will change, and the long-term goal of carbon neutralization in China is just around the corner.
Iron ore is a trump card in Australia's foreign trade. What they are most worried about is the collapse of iron ore prices. Of course, China's heavy counterattack is to "cut" Australia's iron ore. next, domestic iron and steel production restrictions
are likely to be tightened. We look forward to where the steel price can be high!