China is actively decreasing its reliance on Australian iron ore, which is creating “downward pressure on prices and restrictions on growth for Australian exporters,” according to Commonwealth Bank analyst Madison Cartwright. This strategic shift is driven by China’s desire to mitigate vulnerabilities arising from Australia’s dominance in iron ore exports, particularly given Canberra’s growing security alignment with the United States through AUKUS and other regional initiatives.
Cartwright noted that China is leveraging its position as a dominant iron ore buyer to promote yuan-based trade settlements as part of its broader de-dollarisation efforts. China’s mitigation strategy includes foreign investments, increased adoption of scrap steel, and what Cartwright describes as economic coercion. These measures reflect China’s broader ambition for self-sufficiency and its intent to leverage its structural power in global markets.
According to Cartwright, these mitigation strategies are expected to continue, even in the absence of direct conflict, as neither Australia’s relationship with the United States nor China’s assessment of the international environment is likely to change significantly. The sustained effort to diversify iron ore sources will likely result in continued downward pressure on iron ore prices and restricted growth for Australian exporters. This reflects a long-term strategic recalibration by China to reduce its dependence on a single supplier amid geopolitical uncertainties.
