Commodity

How China will finally cripple Australia with its trade war in 2022 as iron ore and coal prices fall

How China will FINALLY cripple Australia with its trade war in 2022 – with prices for our biggest export set to keep falling

  • Westpac is expecting iron ore and coal prices to keep falling in 2022 and 2023
  • Iron ore prices have halved since late July but coal prices surged to record high
  • More Brazilian iron ore is expected to boost global supplies and weigh on price 










China could finally cripple Australia with its trade war as commodity prices crash in 2022.

While iron ore prices have halved since July, this occurred as coal prices rose to record highs in October with China suffering widespread blackouts.

Australia benefited from higher commodity prices even as China slapped punitive tariffs on barley, timber and seafood, in retaliation at calls for an inquiry into the origins of Covid.

But in 2022, the Westpac bank is expecting both iron ore and coal prices to fall.

China could finally cripple Australia with its trade war as commodity prices crash in 2022 (pictured is Chinese President Xi Jinping with North Korean leader Kim Jong Un)

China could finally cripple Australia with its trade war as commodity prices crash in 2022 (pictured is Chinese President Xi Jinping with North Korean leader Kim Jong Un)

World’s major iron ore suppliers

AUSTRALIA: 37 per cent

BRAZIL: 16 per cent

CHINA: 12 per cent

INDIA: 10 per cent

RUSSIA: 5 per cent

Source: Western Australia Department of Jobs, Tourism, Science and Innovation 

Senior economist Justin Smirk said high commodity prices this year had simply encouraged other nations to boost their production, which would in turn increase global supply.

‘There’s an old adage in commodities markets that high prices are a cure for high prices,’ he said.

‘The current market has significant potential for a strong supply response to combine with demand becoming more sensitive to higher prices.’

Since the end of July, iron ore prices have halved from more than $US200 a tonne, sinking to $US84.61 by November as China, Australia’s biggest trading partner, slashed steel production.

Apartment builder Evergrande’s default would also send panic through China’s property sector and further diminish demand for steel. 

Prices in December have recovered to $US102.50 but Westpac is expecting the iron ore spot price to fall to $US77 by December 2022 and $US64 by September 2023.

Brazil, the world’s second-biggest producer of iron ore after Australia, has suffered since the 2019 Vale tailings dam collapse. 

Almost three years on from that disaster, the South American nation is recovering, with more production during the past three months boosting supply and weighing down the price.

Westpac senior economist Justin Smirk said high commodity prices this year had simply encouraged other nations to boost their production, which would in turn increase global supply. He is expecting the iron ore spot price to fall to $US77 by December 2022 and $US64 by September 2023 (pictured is Fortescue Metals Group chairman Andrew Forrest with Prime Minister Scott Morrison)

Westpac senior economist Justin Smirk said high commodity prices this year had simply encouraged other nations to boost their production, which would in turn increase global supply. He is expecting the iron ore spot price to fall to $US77 by December 2022 and $US64 by September 2023 (pictured is Fortescue Metals Group chairman Andrew Forrest with Prime Minister Scott Morrison)

‘This should keep pressure on iron ore prices for the near term,’ Mr Smirk said.

‘It takes about 45 days for Brazilian iron ore exports to reach Chinese ports this supply should keep downwards pressure on iron ore prices.’ 

Coal spot prices in October hit a record high of $US269 as China suffered widespread blackouts, with Australian coal ships left stranded outside key ports.

The Newcastle futures price has since moderated to $US163 a tonne and Westpac is expecting prices to plunge by another third to $US113 by December 2022 and to $US103 by March 2023 as recent flooding affects supply.

‘The weather induced shocks to Australian coal exports will be short lived with coal prices set to fall between 24 per cent and 33 per cent,’ Mr Smirk said.

Coal spot prices in October hit a record high of $US269 as China suffered widespread blackouts, with Australian coal ships left stranded outside key ports. The Newcastle futures price has since moderated to $US163 a tonne and Westpac is expecting prices to plunge by another third to $US113 by December 2022 and to $US103 by March 2023 as recent flooding affects supply (pictured is a freight train at Kooragang in Newcastle)

Coal spot prices in October hit a record high of $US269 as China suffered widespread blackouts, with Australian coal ships left stranded outside key ports. The Newcastle futures price has since moderated to $US163 a tonne and Westpac is expecting prices to plunge by another third to $US113 by December 2022 and to $US103 by March 2023 as recent flooding affects supply (pictured is a freight train at Kooragang in Newcastle)

Australia benefited from higher commodity prices even as China slapped punitive tariffs on barley, timber and seafood, in retaliation at calls for an inquiry into the origins of Covid. But in 2022, the Westpac bank is expecting both iron ore and coal prices to fall

Australia benefited from higher commodity prices even as China slapped punitive tariffs on barley, timber and seafood, in retaliation at calls for an inquiry into the origins of Covid. But in 2022, the Westpac bank is expecting both iron ore and coal prices to fall

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