China in Australia

        It comes as no surprise that China is the world's heaviest consumer of iron-ore (key component of steel), as well as being the second largest producer. Australia ranks first in iron-ore exports and their relationship with China regarding the world's most important commodity cargo after oil has become even more essential due to Chinese steel production and grade quality decreasing. Current trends indicate that iron imports to China will increase to one billion tons in 2018. Despite China's only increasing appetite for iron-ore, prices are not likely to rise so significantly because of Australia's responsive increase in iron-ore exports which are anticipated to grow at an 8% annual rate from now to 2018, when total output would be 874 million tonnes.

       Australia's booming iron-ore sector has been spurred by China's rapid industrialization, greatly helping their economy in this tough climate. Is it possible that there could be an iron-ore crisis in the future due to increasing global demands, particularly from China? It is not likely that this boom will become a bust for Australia's mining sector; however, China must properly plan its national strategy for iron ore resources. Two weeks ago, China initiated its first iron-ore futures contract giving them added control in setting market prices. For now, it is too early to predict the effects of the Dalian Commodity Exchange contracts but while there are few major suppliers of steel and China's foreign demand is strong, importers like Australia will continue to hold the benchmark for prices.

1. Behrmann, E. (2013). Iron-Ore Forecasts Raised by Australia as China Demand Jumps. Retrieved from http://www.bloomberg.com/news/2013-10-02/australia-increases-iron-ore-estimate-on-chinese-demand-outlook.html

2. Bloomberg News. (2013). Dalian Iron Ore Futures Debut as China Seeks Pricing Power. Retrieved from http://www.bloomberg.com/news/2013-10-17/iron-ore-futures-debut-in-dalian-as-china-seeks-pricing-power.html

3. Russell, C. (2013). China iron ore futures start strongly, but long way from domination. Retrieved from http://www.reuters.com/article/2013/10/31/column-russell-china-ironore-idUSL3N0IL19R20131031