China is actively reducing its dependence on Australian iron ore, creating “downward pressure on prices and restrictions on growth for Australian exporters”, Commonwealth Bank analyst Madison Cartwright says.
“China is using its dominance as an iron ore buyer to push for yuan-based trade settlements as part of its de-dollarisation efforts.”
Cartwright said Australia’s dominance in iron ore exports had created a strategic vulnerability for China, given Canberra’s deepening security alignment with the United States through AUKUS and other regional initiatives. She said China wanted to guard against the risk of iron ore supplies being disrupted if access to Australia were restricted or banned in the event of conflict.
“China’s mitigation strategy combines foreign investments, scrap steel adoption, and economic coercion, reflecting its broader ambition for self-sufficiency and leveraging its structural power in global markets,” she said.
“Given that neither Australia’s relationship with the United States nor China’s threat assessment of the international environment will likely change, China’s mitigation strategies will continue, even in the absence of a conflict. The result will be downward pressure on iron ore prices and restrictions on growth for Australian exporters.”