China Puts Australia on Notice With Push to Diversify Iron Ore

Beijing threw the spotlight on trade tensions with its top commodities supplier, Australia, after the government’s economic planning agency said it’s looking to diversify China’s supply of iron ore.

Chinese firms should boost domestic exploration for the steel-making input, widen their sources of imports, and explore overseas ore resources, the National Development and Reform Commission said at its monthly briefing.

The NDRC also said Australia should stop damaging economic and trade cooperation with China and take measures to promote the healthy development of bilateral ties.

Iron ore is Australia’s biggest export earner, and relations with Canberra have taken a turn for the worse in recent weeks. But adding the mineral to a raft of curbs already in place on Australian commodities would be a risky move given near-record prices and China’s dependence on Australia’s high-quality supply for about two-thirds of its imports.

“While an outright ban would be almost unimaginable, various forms of restrictions, delays or increased administrative burdens on Australian iron ore imports could yet happen,” Wood Mackenzie said in a recent note.

Chinese industrial commodities prices powered on, meanwhile, recovering much of their poise after last week’s pullback.

Citigroup said further gains for markets like steel, aluminum and coal are supported by solid demand and a policy agenda that includes “domestic production crackdowns for environmental, energy and safety control purposes,” according to a note from the bank.

At the same time, an acceleration in credit tightening is unlikely in the foreseeable future after the central bank expressed only limited concern about the surge in commodities prices feeding through into CPI, Citigroup said.

Otherwise, the day’s agenda is led by China’s agricultural imports for April. Purchases of corn, wheat and sorghum are likely to stay elevated, as China’s buying binge continues to help fuel a global grains rally.

Events Today

(All times Beijing unless noted otherwise.)

  • China’s 2nd batch of April trade data, incl. agricultural imports; LNG & pipeline gas imports; oil products trade breakdown; alumina and rare-earth product exports; bauxite, steel & aluminum product imports
  • LONGi Green, Goldwind execs among speakers at Macquarie Group conference in Hong Kong
  • EARNINGS: Daqo New Energy

Today’s Chart

China’s data dump for April suggests the economy’s expansion may have plateaued as policy makers seek to rein in commodities-intensive spending on real estate and infrastructure before new growth drivers of consumer spending and manufacturing investment have recovered.

China Puts Australia on Notice With Push to Diversify Iron Ore
Markets Latest
Copper +1.6% in ShanghaiCrude oil +2.1% in Shanghai
Iron ore +2.8% DalianSteel rebar +0.4% in Shanghai
Thermal coal +0.4% in ZhengzhouCoking coal -0.4% in Dalian
Live hogs -0.6% in DalianCorn unch in Dalian
Soybeans -0.2% in DalianRubber +0.1% in Shanghai

On the Wire

Shaanxi province, China’s third-biggest coal producing region, hit a clean energy milestone last month when generation from renewables briefly topped thermal power for the first time.

In a town on the edge of the Gobi desert is a sign in English and Chinese that reads “Oil Holy Land.” Nearby, a preserved drilling rig marks the spot of China’s first commercial oil well.

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The Week Ahead

Wednesday, May 19

  • China’s monthly loan primes rates, 09:30
  • China’s April output data for base metals and oil products
  • HOLIDAY: Hong Kong

Thursday, May 20

  • China’s 3rd batch of April trade data, including country breakdowns for energy and commodities
  • SMM battery materials conference in Changsha, Hunan, day 1
  • USDA weekly crop export sales, 08:30 EST

Friday, May 21

  • Ganfeng Lithium, EVE Energy, Huayou Cobalt execs among speakers at Macquarie Group conference in Hong Kong
  • China weekly iron ore port stockpiles
  • Shanghai exchange weekly commodities inventory, 15:30
  • SMM battery materials conference in Changsha, Hunan, day 2
  • AGMs: Cnooc, Tianqi Lithium, CATL

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