Beijing [China], May 7 (ANI): China may move towards reducing its steel demand in the near future as stakeholders in the industry are getting concerned about high iron ore prices amid growing tensions with its biggest supplier Australia.
According to the South China Morning Post (SCMP), China's state-dominated steel sector is concerned about surging prices, urging the government to help with market "malfunctions" and improve policies in the futures market.
China imports over 50 per cent of its iron ore from Australia, and consumes more iron ore than any other nation. "The problem with high iron ore prices is that money is leaving the steel-producing countries and ending up with the iron ore producers and the governments of countries that produce the iron ore," Erik Hedborg, senior analyst at commodities firm CRU.
"Longer-term, one problem with high iron ore prices that feed into the price of steel is potential demand destruction if the prices of steel-containing goods get too high."
Meanwhile, some market experts don't see high iron ore prices as a factor in the trade dispute between Beijing and Canberra.
"I don't think the high iron ore price is a factor in the trade dispute between the two countries, but it's probably not helping," said Oliver, chief economist at investment manager AMP Capital. "Not that there is much that can be done about it in the short-term beyond moving back away from using market forces to determine the price."
This comes as China has decided to suspend all its activities under the Strategic Economic Dialogue with Australia, a move that is likely to exacerbate the tense diplomatic relations between the two countries.
Last month, Australia scraped the controversial Belt and Road (BRI) agreement with China citing the deal as against its national interest. Australian Foreign Minister Marise Payne had said that the BRI deal has been canceled under the Commonwealth's new foreign veto laws.
China responded by stating that Australia's decision to cancel agreements between Beijing's flagship BRI initiative with the state of Victoria was among several "negative moves" that had hurt bilateral relations.
China's top diplomat, who is in Canberra currently, blamed Australia for deteriorating ties between the nations, accusing it of economic coercion and "provocations" in a wide-ranging speech that painted Beijing as a victim.
Sino-Australian relations have been in a downward spiral since April last year when Canberra infuriated Beijing by proposing an independent international inquiry into the origins of the COVID-19 pandemic.
Canberra has been locked in an ongoing trade war with Beijing for several months as China has slapped sanctions on various Australian products. (ANI)