China’s trade sanctions are not failing Australia’s economy, as high demand in Beijing for iron ore keeps prices at high levels for years to come.
Spot prices for the material, which was used to make steel, rose this month above $ US150 ($ A200) for the first time since 2013.
On Tuesday night, prices had risen to $ US176 ($ A233) a tonne or levels not seen since 2011.
As of May, Iron Ore, Australia ‘s largest exporter, was worth just $ US80 per metric tonne.
Westpac has now updated its forecasts and expects core output to remain as high as $ US100 per tonne by December 2022.
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China’s trade sanctions against Australia are not biting with iron ore prices expected to remain at elevated levels for at least another two years. Westpac has now updated its forecasts and the major product is expected to be worth $ US100 per tonne by December 2022
Justin Smirk, a chief economist with the bank, said China would continue to produce more steel in the next two years as governments around the world use construction and infrastructure programs to save key economies. with Pump Covid-19 locks.
‘We may be close to heights in the Chinese growth trend but the pace is likely to be maintained for a long time into 2022,’ he said.
The balance of risks for goods has shifted clearly with strong Chinese growth, global fiscal and monetary stimulus and ongoing supply constraints.
‘We now expect commodity prices to remain well supported in the second half of 2021.’
China gets 60 per cent of its iron ore from Australia as the other major Brazilian producer continues to struggle after the collapse of the Vale tail tail in early 2019.
‘Supply conditions are expected to improve through 2021 but prices have not been substantially halted,’ Mr Smirk said.
Justin Smirk, Westpac’s chief economist, said China would continue to produce more steel in the next two years as governments around the world pump out more stimulus programs to stimulate demand at the time of the Covid pandemic . Pictured last year’s Chinese military parade is the 70th anniversary of the Communist Party in power
Iron ore was, by and large, the largest export in Australia in 2019-20, with China purchasing $ 70 billion worth of this product.
China, Australia’s largest trading partner, bought $ 150 billion worth of exports in the last financial year.
That meant that Beijing’s imposition of penalty tariffs on some goods in Australia had little impact on the economy as a whole.
In May, China imposed 80 percent tariffs on barley, prompting an official complaint this month to the World Trade Organization from former trade minister Simon Birmingham.
Australian wine also accounted for 212 per cent of import taxes in November, following months of trade fears against exporters of beef, lobster, timber, lamb and even coal.
China took the steps after Australian Prime Minister Scott Morrison conducted an independent investigation into the spread of Covid-19 pandemics from its source in Wuhan, China.
When it came to iron ore prices, Westpac was much more optimistic than the Australian government.
The Treasury, in its Mid-Year Economic and Fiscal Forecast released last week, expected iron ore prices to fall back to $ US55 per tonne by the end of the year. September 2021.
The October Budget predicted that the main commodity price would fall back to $ US55 by the end of June next year.
Westpac is much more optimistic than the Treasury, forecasting iron ore spot prices of $ US126 per tonne by June 2021 and $ US120 per tonne by September next year.
Australia ‘s second largest bank expects iron ore prices to remain above $ US70 until mid – 2024.
Higher iron ore prices also mean more government revenue from commodity kingdoms.
Spot prices for the material used to make steel this month rose above $ US150 ($ A200) for the first time since 2013. On Tuesday night, prices had risen to $ US176 ($ A200). A233) per ton or levels not seen since 2011. As recently as May, an iron ore was worth just $ US80 per metric ton. Pictured is a dump truck at Roy Hill Mine in the Pilbara region of Western Australia
Mr Smirk said prices of goods, particularly iron ore, would remain high next year as manufacturers sold their products.
‘Steel production continues to set new highs, investments remain low while sales and prices remain strong, suggesting that China’s steel cycle needs to run before it arrives. to a height, ‘he said.
Covid ‘s vaccine release was expected to boost Australian economic growth and the dollar, with Westpac expecting the currency to climb from 75 US cents now to 80 US cents by December 2021.
‘The introduction of the Covid vaccine in late 2020 / early 2021 is already changing near-term views of social activity and should therefore help accelerate the normalization of economic activity,’ Mr Smirk said.