Despite the worldwide boom in commodity prices, Australian Treasury officials are budgeting for 2022 US $ 55 per tonne of iron ore.
"The iron ore price is projected to drop to $ 55 per tonne on FOB terms by the end of the March quarter of 2022, three quarters later than the 2020-2021 budget projected," quoted by The Australian the country's draft budget for the next two years.
Iron ore is one of Australia's top exports, with China, rapidly recovering from the pandemic, the largest consumer.
On May 10, the price of ore in Asian markets jumped by 10%, exceeding USD 206 per ton in China. At the same time, in Singapore, iron ore futures rose to $ 220 per ton, which became an absolute record in dollar terms.
China's steel production continues to grow despite attempts by the Chinese government to cut excess capacity to meet environmental targets. In March, steel production in the PRC increased by 19%. Against this backdrop, in April, imports of iron ore in China increased by 43% on an annualized basis, although these figures may be associated with the low base effect of the pandemic April 2020.
As a reminder, last week China "indefinitely" suspended all activities within the Sino-Australian Strategic Economic Dialogue, which was the latest setback in tensions between Beijing and Canberra.
Bilateral relations escalated in 2018, when Australia became the first country to publicly ban Chinese tech giant Huawei from accessing its 5G network. Relations worsened last year when Australia called for an independent investigation into the origin of the new coronavirus, prompting trade crackdowns from China.
If the trade war gets serious, the consequences for Australia will be much worse than for China. For Australia, China is a key trading partner, while Australia is not among the top 10 countries with the largest importers of Chinese products.