Wednesday, December 1

Iron price plummets as China reacts angrily to UK-US-Australia deal

As the price of iron ore plummeted, China’s “risk-taking” behavior could increase due to Australia’s move to curb its dependence on the communist country.

Australia’s biggest export, iron ore, has seen its price drop near the $ 100-ton mark as an “angry” China grapples with the landmark US-UK deal for the submarine program. nuclear power plants from Australia.

The price of iron ore fell dangerously 8.1 percent to $ 107.21 a ton.

The raw material had reached an all-time high in May when prices soared to a record $ 237 a tonne.

But there has been a “crash” in the price of iron ore since May, said Commonwealth Bank mining and energy economist Vivek Dhar.

Michael Shoebridge, director of defense, strategy and national security at the Australian Institute of Strategic Policy, said the fall in the price of iron ore reflects China’s decision to reduce its steel production, but also its policy of using trade as ” weapon”.

“That obviously fits in with the fact that China is on a clearly coercive path with trade with Australia and is only reinforced by the announcement by the Australian, UK and US governments for nuclear submarines and this is the kind of dynamic. wide that is happening, “he told the news.

“But the unfortunate fact for Beijing is that the rest of the world’s supply cannot meet their demands and there is a nondiscretionary need for an iron ore source: their economy needs steel as they are still urbanizing the population there and in the coming years. years. decades, so it’s creating the underlying demand that they have for steel. “

The new alliance formed between the three countries, where the United States will share secret nuclear technology to assist Australia in the shift to nuclear-powered ships, marks the most significant strategic change in direction in decades.

Mr Shoebridge said it was a clear move by Australia “to make China matter less for our economic future.”

He believed the new association was in response to China’s trade war and the communist country’s strategy to increase coercive influence over other economies.

Chinese Foreign Ministry spokesman Zhao Lijian lashed out on Thursday, saying the deal “seriously damages regional peace and stability, intensifies the arms race, undermines the non-proliferation treaty and that” the international community, including neighboring countries, you have good reason to question Australia’s sincerity. “

Chinese leaders will use all the tools they can, including the military, when they think they can get away with it, which is why deterrents are so important, Shoebridge added.

“I don’t think there are many prospects for a direct military conflict just between Australia and China, but I think the region should be more secure against risk-taking China,” he said.

He added that China is very busy intimidating and coercing Southeast Asian countries by sinking fishing boats and occupying disputed territories, but they are still trading with them.

Mr. Shoebridge noted that we are “living in a more dangerous world” and China is “angry”, but there could be a peaceful future ahead.

“I think the most important thing is underneath the superficial expression of anger and the propaganda of the copper plate about the mentality of the Cold War is the coldest calculations in Beijing that arise from the agreement between Australia, the United States and the United Kingdom. It is that the costs of China using military power are increasing and that is a good thing, since it is something that can deter China from using its military power against others, ”he said.

“There could be a future where powerful nations like Australia, the United States and the United Kingdom and other partners deter China militarily and that lays the groundwork for some kind of economic relationship, but that’s a bit far off.”

Australia’s most valuable commodity is still expected to drop in price in the coming months and also in the year, according to predictions.

“We expect iron ore prices to fall to $ 100 a tonne by the fourth quarter of 2022,” Dhar said.

“This drop in prices just accelerates the moment when we think we’ll get to that level. Prices have already fallen below our fourth quarter 2021 target price of $ 170 per tonne. “

Meanwhile, Shoebridge warned companies and universities with a “deep connection” to China to make alternative plans.

“Any nondiscretionary trade from China to Australia has become a higher risk and if a CEO of a company or university board or council does not understand it now, then they really are in breach of their obligations to shareholders, investors. and employees, “he said.

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