China to set up centralised iron ore buyer to counter Australia’s dominance – FT
Financial Times (FT) came out with a story signaling more disputes between Australia and China as Beijing searches for a centralized iron ore producer.
“China is moving to consolidate the country’s iron ore imports through a new centrally controlled group by the end of this year, as Xi Jinping’s administration seeks to increase Beijing’s pricing power over the industry,” said the FT.
Key quotes
The initiative, led by the China Iron and Steel Association and the planning ministry, involves large state-owned mining and steel groups such as Baowu, China Minmetals Corp and Aluminium Corporation of China, according to people familiar with the effort.
China is the world’s biggest consumer of iron ore with its 1bn tonne a year steel industry absorbing about 70 percent of global production, most of it supplied by Australia. Any move to gain control over prices will probably alarm Canberra given iron ore’s status as the country’s top export.
Government officials and policy advisers told the Financial Times that Xi’s administration had grown frustrated by large price swings over recent years in an industry dominated by Australian producers such as Fortescue Metals Group and BHP, which are likely to be highly concerned by the move.
China could in theory reduce its dependency on Australian iron ore by increasing purchases from big Brazilian producers, such as Vale.
Some analysts, however, are skeptical that Beijing can impose discipline on the hundreds of smaller mills scattered across the country.
AUD/USD retreats
Following the news, AUD/USD prices retreat from an intraday high of 0.7036. The pair’s latest pullback could also be linked to the Aussie traders’ anxiety ahead of the key Australia employment data for May.
Read: When is the Australian employment report and how could it affect AUD/USD?