MNI INSIGHT: RBA Sees Little Risk To China Iron Ore Trade

--While China Cracks Down On Barley, The RBA Sees Little Danger To Iron Ore

By Lachlan Colquhoun

     SYDNEY (MNI) - The Reserve Bank of Australia sees only limited fallout from

any trade dispute with Beijing, calculating that China depends too much on

Australian iron ore to be able to cut back on imports so long as the Asian

giant's economy continues to grow, MNI understands.

     A Chinese move to slap 80% tariffs on Australian barley was meant as

punishment for calls in Canberra for an investigation into the origin of

coronavirus, Chinese policy advisors have told MNI. But Australian barley sales

to China, at about AUD1.3 billion a year, are insignificant in comparison to the

AUD65 billion from iron ore exports, which the RBA sees as far less exposed to

politics.

     Australia is simply too convenient a supplier for iron ore exports to be at

risk, barring a Chinese slowdown, the RBA believes.

     China moved to streamline customs clearance of iron ore imports Thursday, a

move described by Trade Minister Simon Birmingham as a "positive example of the

further opening of Chinese markets", although some industry analysts saw it as a

potential hurdle for exporters.

     The RBA also expects to see continued Chinese demand for coking coal used

in steel production. Australia is a low cost, high volume supplier, while

China's own production is smaller scale and higher cost.

     But thermal coal for use in energy generation could be impacted by lower

power demand during pandemic disruption, as well as by the switch to renewable

energy. Media cited unconfirmed reports on Thursday that some Chinese power

plants have been told to stop importing Australian coal.

     China has also ramped up imports of Australian liquid natural gas in recent

months as it powers up its post-coronavirus economy.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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