China Changes Iron Rules; Potential Threat to Australian Exports

China has implemented a number of changes to rules that govern iron imports into the country in what some are labeling as another trade treat directed at Australia for its advocacy of an independent inquiry into the COVID-19 crisis.

Analysts are forecasting that these changes and amendments have the potential to disrupt, and in extreme cases, stop altogether the ability to export Australia’s most profitable export to China- iron ore. China is Australia’s largest importer of raw iron ore, with Australian imports amounting to more than 60% of the total figure imported each year.

Chinese customs authorities made the announcement that its new supervision rules will be implemented on the 1st of June, and give its inspectors the ability to inspect iron ore at the request of the importer, or trader “when necessary,” according to officials.

The previous system allowed customs authorities to conduct on-site inspections on a batch-by-batch basis for toxic elements in the iron ore. The General Administration of Custom said the new system is designed to “streamline” and “build a better business environment” for customs officials as well as the exporter.

Some analysts have said that the changes actually loosen previous regulations, like Xu Xiangchung of MySteel who told the AFR that “in the past, customers would check every batch of iron ore but now they will only check at the request of importers.”

According to reporting from Michael Smith and Andrew Tillet, “others said it meant officials could let the Brazilian imports sail through without inspections and just check the Australian batches.”

Du Hongfeng, a senior analyst with consultancy firm SteelHome said, however, that the changes have the potential to impact Australian exporters and favour those of competitors like Brazil.

“In order to prioritise the quality inspection of imported iron ore, Chinese authorities made an announcement on the adjustment of the method of inspection,” Hongfeng said. “China takes the same position on all imported iron ore. However, Australia is not grateful to China’s assistance during the outbreak. Instead they asked for a groundless investigation by a following certain country. Therefore the market will link this to other things.”

“One one hand this will improve the quality of imported iron ore and better protect the interests of related companies. On the other hand these measures will quicken the pace of iron ore clearance… some Australian politicians are scared because they did something wrong. Brazil iron ore supplies won’t have this concern,” he concluded.

The state-owned Global Times has quoted Yu Lei, chief research fellow at the Research Centre for Pacific Island Countries at Liaocheng University who said that “this is another implicit warning to Australia… it is associated with how Australia has acted, and a general decline in demand for steel on the global level.”

Deputy Treasury secretary, Meghan Quinn has said that “it is the case that any restrictions in global trade for the commodities we export would be detrimental to our access to international markets.”

“The most important thing for our exports is the overall level of world demand, and the demand for that product in the market,” she added.

Quinn continued to explain that “it is important to think about what’s happening in the whole global market in terms of Australian exports. Even if we currently export to a particular country at the moment, that doesn’t mean it’s the only country that we can export to so if other markets are available then producers can shift their supplies somewhere else,” she concluded.

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