It’s been over a year since China’s tariff war with Australia broke out. This was meant to be a jittering punishment for the Scott Morison government; it has been an enticing one, however. It is the ‘Iron ore’ that has completely ruined economic crusade Jinping had planned against the Kangaroos.
As China’s economy embarks on its way to recuperation, Chinese steel producers have begun showing their unprecedented love for the Australian Iron ore. The uneasy Chinese Govt is now looking forward to pulling the plugs on its steel producers, with an agenda to blow a massive economic strike to Australia. However, the experts fret the move could come back to haunt China itself.
In its monthly briefing, the National Development and Reform Commission (NDRC) recommended Chinese firms boost domestic exploration for the steelmaking input, explore overseas ore resources and widen their sources of imports. The major aim is to cut down iron ore imports from Australia, other than meeting China’s obligations towards Climate-change commitments. The Chinese plan, however, is far from ideal.
The steel industry in China is already marred by the availability of very few input suppliers with Australia being the biggest of them. Also, the big boom in the Steel market around the globe has so far prevented the Chinese steel producers from cutting down the production.
The Chinese government wanted to scale down the steel production this year, but the first half of the year has been a completely different story. The expectation is that the Chinese government will attempt to put the brakes on booming steel production in the second half of this year. However, such adventurism could blow a double whammy to the CCP.
Despite the strong pushback from the producers, if the CCP still manages to cut down the steel production against Australian miners, the move could prove far less than enough to mark a dent in Australian exports.
A source inside one of Australia’s big miners told News.com Australia that “the level of demand across the rest of the world is so strong that they see no need to panic. If China cuts steel production someone else will do it.” The optimism is derived from the fact that the Steel market is red hot right now and a move to cut down production will not only harm the interests of Chinese steelmakers but provide the Indian, Japanese and European steelmakers with an opportunity to reap the benefits at their cost.
For example, India is going hard to increase steel exports, which rose about 26 per cent in the March quarter, according to S&P Global Platts. Indian steelmakers would love to have a lion’s share of their Chinese counterparts’ cake, given the old school Maoist Jinping’s continuous pounding of its own steelmakers just to score political points in the international arena.
Make no mistake; China has a near-monopoly in global steel production. It gives the paper dragon a strategic advantage over its adversaries, apart from fuelling a huge construction industry in the Communist nation that further drives economic growth. But such is Xi Jinping’s desperation to punish Australia that he is ready to let the Chinese economy take a hit by cutting down steel production.
Earlier, the CCP’s similar adventurism against Australian coal had forced the Chinese cities to go dark pushing millions of Chinese citizens to shiver in the freezing temperatures. After hampering the Power sector, a desperate Jinping is now willing to sacrifice China’s steel industry just to see the Australian economy crippling. The boom in the steel market would unquestionably help Australian iron exporters to hunt for new markets. The Chinese steel producers and Chinese economy, however, would emerge out as the biggest losers of Jinping’s gamble.