Australian mining companies are continuing to experience setbacks in exporting minerals to China, prompting the Federal Government to take action.
Foreign Minister Marise Payne is pressuring the Chinese Communist Party (CCP) to respect international trade and stop delaying coal, copper and other commodities from reaching buyers in Mainland China.
Economic coercion ‘concerns’
Payne believes it is plausible CCP representatives could have ordered Chinese customers to stop importing Australian coal and other minerals as a means of economic coercion.
“We do have concerns of these issues,” she said according to the Australian Associated Press.
Sour relationship blamed
The Chinese Ministry of Foreign Affairs refused to admit the CCP has imposed a ban on Australian coal and copper, even though it previously prohibited meat imports from four Australian abattoirs and imposed a new 80 per cent tariff on Australian barley.
The ministry then accused Australia of failing to meet its commitment to maintain friendly diplomatic relations.
“We hope Australia can do more things conducive to mutual trust, bilateral cooperation and the spirit of China-Australia comprehensive strategic partnership, and bring the bilateral relations back to the right track as early as possible,” Chinese Foreign Ministry spokesperson Wang Wenbin said in a public statement.
“We believe a sound and stable China-Australia relationship serves the fundamental interests of both peoples.”
Follow the rules
However, Payne rejected Wang’s allegations and believes his explanation is simply not good enough.
“There has been a consistent denial of any targeting of Australian products and a commitment spoken of in relation to observation of trade rules,” she said.
“We would encourage Chinese authorities to act in accord with those rules … [and] we expect our trade with China to be undertaken consistent with World Trade Organisation obligations.”
The minister will not stop pressing the CCP until it explains its actions.
“We are continuing to seek clarity from the Chinese authorities both here in Australia and in China,” she said.
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It is unclear whether any previous Australian coal orders will be permitted through China Customs as a number of cargoes are experiencing either delays or defaults. Only some ships were permitted to unload cargo at certain Chinese ports at the time of publication.
QMEB understands souring Australia-China relations could mean future coal orders will be sourced from Russia and Indonesia instead.
Want to get the Chinese to pay attention?
Cut iron ore exports to them immediately. This is their pinch point.
Subject their exports to Australia to similar scrutiny they are doing to us. Start with their vehicle exports to Australia. Keep them shipborn until we have “inspected” them. No real rush on that one….
People misread and misjudge the CCP ECONOMIC PRINCIPLES in their prognosis of doom for the Chinese economy – w.r.t the massive upliftment of 100s of millions out of abject poverty,drudgery and misery.
Take the example of the Chinese “Ghost Towns” and its impact on Bank NPAs
Let us assume that 30 million tons of steel,was used in the so called ghost towns,15 years ago.After 30 years, when these buildings are replaced,this will be steel scrap,and its price will be double the price.of prime steel today.The cement is a dead loss.
But let us dig deeper.Bao Steel may bill steel to a builder,at say,200 usd/ton,but the Marginal cost of that steel,might be 100 usd/ton.This is not enough.The Marginal COST To the steel cluster,in a communist nation would be 15-20 usd per ton,as the coal mines and steel factory,ports,rails,roads etc.,are already in place.The difference between the coal tarriff and the marginal cost of coal is a TRANSFER PAYMENT FROM Bao steel to the coal mine and ports etc (if Bao is buying Coal)
If Coal is selling at 50 usd/ton,the Marginal Cost would be 4-5 USD (being cost of power,diesel and cost of variable labour).
So the MARGINAL COST of the Ghost towns,would be 10-15% of the contracted value of the towns.
At that time,it was the RIGHT decision to set up these “ghost towns”,as the price of steel,coal,cement,paints,labour etc., was much lower,and so was their marginal cost.It made sense to lower the ENTIRE PRODUCTION cost of these plants, by MAXIMISING production, and then using the production,in so called GHOST TOWNS.The benefit of lowering the ENTIRE PRODUCTION cost of the steel,coal,cement plants,would be in the billions of USD.IF THE SAME INFRASTRUCTURE WERE TO BE SET UP AT TODAY’s PRICES OF steel,coal,cement,the cost WOULD BE MUCH HIGHER (far beyond the accrued Chinese Inter bank interest rates over the years)
As far as the banks who lent to the builders of these so called ghost towns – it is important to understand that the Banks have NOT funded the towns.The Banks have funded the input suppliers of these towns,id.est., the steel,cement,paints, furniture and appliances etc factories. In particular,the banks have implicitly funded,the profits of these input suppliers.
Then we calculate the employment provided to a mass of labour in these ghost town projects,and its attendant benefits and the management and technical expertise,developed by the builders,in these ghost town projects.
It must also be noted that the INCREMENTAL PROFITS earned by the steel,cement,paints,furniture and appliances etc. factories,as suppliers to the builders of the ghost towns – would have in the last 15 years,based on a ROCE of 20-30 % ,yielded an aggregate return of 1000-1500% to date (with the attendant revenue streams to the PRC,in the form of direct and indirect taxes,besides other incidental gains)
Hence,for a Communist nation,the Marginal Cost for the Cluster of the “Ghost Towns” (which includes the downstream supply chain benefits and the benefits to the state) is very low and MIGHT even be NEGATIVE,based on the Marginal Cost of the CLUSTER.
If the PRC calculates the incremental gains to the steel,cement,paints,furniture and appliances etc. factories,and their staff,over the past 15 years and the revenue earned by the state from this chain,over the last 15 years,the gains per se, could more than bail out the bank loans,to the so called ghost towns
IT MUST BE NOTED THAT THE LABOUR USED IN THE GHOST TOWNS,AND THE LABOUR USED (IN PART),IN THE INPUT SUPPLIERS, TO THESE GHOST TOWNS – would have had NO OTHER employment,were it NOT for the Ghost town projects. These millions of labour were introduced into the labour pool,ONLY due to these Ghost Towns.Of course,they would have inevitably entered into the labour pool – but only after 5-10 years (on such a large scale).
Hence,there is no loss to the PRC,on account of these so called “ghost towns”.dindooohindoo