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


As the price of iron ore plummets, China’s “risk-taking” behavior may increase due to Australia’s decision to reduce its dependence on the communist country.

Australia’s biggest cash cow export iron ore has seen its price drop close to US $ 100 as an “angry” China grapples with historic US deal. United Kingdom and United Kingdom for Australia’s nuclear submarine program

The price of iron ore plunged dangerously 8.1% to $ 107.21 per tonne.

The raw material hit a record high in May when prices climbed to a record US $ 237 per tonne.

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

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

“This obviously corresponds to the fact that China is clearly on a coercive track with trade with Australia and this is only reinforced by the announcement by the Australian, British and American governments of nuclear submarines and that is the kind of broad dynamic that is happening, “he told reporters. .com.au.

“But the unfortunate fact for Beijing is that the rest of the global supply cannot meet their demands and there is a non-discretionary need for a source of iron ore – their economy needs steel because they’re still urbanizing the population there and for decades to come, so that creates the underlying demand they have for steel.

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

Mr Shoebridge said it was a clear decision by Australia “to make China less important to our economic future”.

He believed the new partnership was a 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 went on a rampage on Thursday and said the deal “seriously undermines regional peace and stability, intensifies the arms race, undermines the treaty of no -proliferation and that “the international community, including neighboring countries, has good reason to question Australia’s sincerity.”

The Chinese leadership will use any tool they can, including the military, when they think they can get away with it, which is why deterrence is so important, Mr. Shoebridge added.

“I don’t think there is much prospect of a direct military conflict between Australia and China, but I think the region needs to be more insulated from China taking risks,” he said. he declared.

He added that China is actively working to intimidate and coerce Southeast Asian countries by sinking fishing vessels and occupying disputed territories, but continues to trade with them.

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

“I think the most important thing is under the superficial expression of anger and the copperplate propaganda on the Cold War mentality is the colder calculations in Beijing from the Australia, US deal,” UK. It is that the costs of the use of military power by China are increasing and that is a good thing because it is something that can dissuade China from using its military power against others ”, a- he noted.

“There could be a future where powerful nations like Australia, the United States and the United Kingdom and other partners militarily deter China and that lays the groundwork for some sort of economic relationship, but that is still far away. “

The price of Australia’s most valuable commodity is forecast to fall further in the months and year to come.

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

“This drop in prices just accelerates when we think we will reach that level. Prices have already fallen below our fourth quarter 2021 price target of US $ 170 per tonne. “

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

“Any non-discretionary trade from China to Australia has become riskier and if a CEO of a board of directors of a company or a board of directors or an academic board does not understand that now , so in reality, he’s pretty much violating his duties to shareholders, investors and employees, “he said.

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