Strong ongoing demand': Fortescue chief confident on China as other sectors fret
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FIND OUT MOREAlready subscribed? Log inThe head of mining giant Fortescue Metals Group is confident China's demand for Australian iron ore will remain strong and says the nation's biggest trading partner is fundamental to the health of the wider economy.
As trade tensions threaten to erupt between Canberra and Beijing, exports of the steelmaking raw material iron ore to China have emerged as a bright spot and have been boosting the fortunes of miners BHP, Rio Tinto and the Andrew Forrest-backed Fortescue, whose shares hit a record high on Tuesday for the second day in a row.
Demand for iron ore remains strong.CREDIT:BLOOMBERG
Fortescue chief executive Elizabeth Gaines said demand for iron ore – Australia's biggest export – was on track to expand even further as China's rapid economic recovery from its coronavirus lockdown leads to greater steel output.
"We have always adopted a multifaceted approach to engagement with China, which extends to procurement, financing and sponsorship," Ms Gaines said.
Advertisement"Going forward, we see strong ongoing demand for iron ore and anticipate a steady recovery in economic activity in China, which will continue to contribute significantly to WA's and Australia's prosperity," she said.
Australia's relations with China have been under strain since the Morrison government began seeking an inquiry into the coronavirus outbreak's origins. China, which has already banned beef from four Australian abattoirs, has announced an 80 per cent tariff on Australian barley and there have been suggestions in Chinese state media in the past week the friction could spill over into the trade of Australia's most lucrative export, iron ore.
However, curtailed supply from elsewhere in the world because of COVID-19 outbreaks and strong demand from Chinese steel makers have quelled market concerns, with the iron ore price surging 10 per cent since May 1.
Rio Tinto, the largest producer of iron ore, said demand in China was "as strong as ever".
"If I look at China, all our order books are full," Rio Tinto chief executive Jean-Sebastien Jacques said last week.
"Because steel demand has not been strong outside China ... we have managed to reallocate some of our product from [Rio Tinto's majority-owned] Iron Ore Company of Canada to China."
China's steel sector, which accounts for more than 70 per cent of global iron ore demand, has been closely watched during the pandemic for signs of any slowdown.
Industry analysts said iron ore output in Brazil, the biggest supplier outside of Australia, remained weak amid rising coronavirus infections, and the global seaborne iron ore market was expected to remain tight, meaning the Chinese government would struggle to substitute out Australian iron ore if it wanted to.
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