China Trade Fuels Australian Growth

Australian energy and natural resource exports to China have boomed this year, opening the potential for greater breakbulk activity on the country’s resource-rich west coast.

Despite restricted demand from China, due to the Covid-19 crisis earlier this year, demand for Australian commodities has since boomed, with research consultancy Wood Mackenzie reporting that year-to-date iron ore and LNG imports are now up 8 percent and 9 percent, respectively, compared to 2019.

“China depends highly on Australian iron ore. Around two-thirds of its imports come from Australia, with this supply making up half of all iron ore consumed in China ... Right now, Australian miners are operating at capacity and struggling to increase output,” said Gavin Thompson, Wood Mackenzie Asia Pacific vice chair.


LNG Infrastructure

The strong demand for Australian resources is driving a wave of new infrastructure, requiring breakbulk activity. Authorities in Western Australia recently announced plans to build a an international LNG fueling hub in the Pilbara region.

"The Pilbara is already globally renowned as an LNG production powerhouse, and my government is taking steps to turn the Pilbara into an international LNG fuelling hub,” said Mark McGowan, Premier of Western Australia.


Political Tensions

The boom in trade comes despite growing political tensions between the two countries, with Canberra calling for an independent international inquiry into the origins of Covid-19 and Chinese media calling for a boycott of Australian goods.

While no concrete steps have been taken so far, Wood Mackenzie notes that tariffs, quotas or other restrictions could be placed on Australian iron ore, as a signal that China is no longer prepared to tolerate what it sees as Australian political interference.

“Could relations deteriorate to the extent that demand for these commodities is damaged? It’s possible … But such a move would also come at a cost to China. Any disruption to its imports of Australian energy and iron ore would have an immediate impact on both price and China’s own supply needs. Longer term, the damage to strong existing trade relations could be irreparable,” Thompson noted.
 

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