Iron ore has played a crucial role in maintaining a mutually beneficial relationship between China and Australia, said Australian experts.
In the resource-rich Pilbara region of Western Australia, iron ore is extracted on a massive scale, with around 80 percent of the processed material shipped to China for steel production.
"They are a significant customer of Australian iron ore. Australia's big miners, especially big iron ore miners, have been over the course of the last of a long period of time, being well hooked into supplying iron ore to China at efficient, low cost rate," said David Lennox, resource analyst of Fat Prophets, which is Australia's leading equity research and funds management company.
This supply and demand dynamic have steadily grown over the years. In 2022 alone, Australia exported around 736 million tonnes of iron ore to China, representing approximately one-third of the country's total export trade with China.
"Iron ore is certainly one of the reasons why Australia can feel that this is a lucky country [after being able] to sail over very rough waters and still maintain a trade surplus, still maintain a huge trade volume with our main trading partner," said Hans Hendrischke, a professor of Chinese business and management at University of Sydney.
Economists highlight that the strength of iron ore exports has shielded Australia's economy during global downturns. In 2023, exports to China were valued at an estimated 105 billion U.S. dollars.
Hendrischke further emphasized the strategic importance of this trade relationship for China.
"And it is, of course, something that is very important to China because Chinese export industries, Chinese infrastructure development – all of these areas are linked to Australian inputs of iron ore and iron steel into the Chinese economy. So, it's something which China wants to keep on a stable keel and of course that is in Australia’s interest as well," said Hendrischke.
Australia is also a major producer of lithium, with approximately 85 percent of the mineral exported to China for electric vehicle battery production. However, the revenue generated from lithium exports pales in comparison to that of iron ore.
While the world is transitioning to greener alternatives and reducing its dependence on fossil fuels, experts note that there is currently no suitable substitute for steel. This is positive news for Australia, particularly considering the country's estimated reserves of approximately 52 billion tonnes of iron ore, the largest in the world.
"Really, when you have a look at the demand equations, China can’t do without a consistent supply of iron ore. There is no replacement really if Australia shuts down and we can't obviously do without their demand for iron ore to manufacture steel, so it's a win-win relationship for both," said Lennox.
Experts predict that this complementary cooperation between China and Australia in the iron ore trade will continue to thrive well into the next decade.
![China, Australia maintain complementary cooperation on iron ore: experts](https://image.bastillepost.com/1138x/wp-content/uploads/global/2024/06/8381982_1718711012002_a.jpg.webp)
China, Australia maintain complementary cooperation on iron ore: experts