Iron ore has been at the heart of Australia’s commercial relationship with China ever since the early 1980s, when Prime Minister Bob Hawke sealed a deal with China’s Premier Zhao Ziyang for the joint development of Rio Tinto’s Channar deposit in the Pilbara. It was modern China’s first ever foreign investment.

Until very recently, it seemed like a perfect match. Australia possesses abundant high-quality iron ore reserves with relatively easy rail access to deepwater ports that are at the start of a direct sea route to China of just 7,500 kilometres.

Bulk carriers from Brazil—Australia’s main competition in the Chinese iron ore market—must travel over 20,000 kilometres to reach their destination, usually taking three months to do the round trip.

Australia’s big iron ore miners had the capital, the technology and the scale to keep pace with the extraordinary growth of China’s steel industry over the first two decades of the 21st century. Brazil lagged far behind.

Without Australian iron ore, China’s great economic advances, built on rail and highway networks stretched across the country, vast high-rise cities and the world’s biggest manufacturing industry, couldn’t have happened.

It’s been a bonanza for Australia’s iron ore miners, whose export sales reaped more than $150 billion last year, of which around 80% came from China. The benefits have flowed through to shareholders, state and federal governments and, through the impact of such profits on the exchange rate, to ordinary consumers who have gained from cheaper imports.

But, with the collapse of bilateral relations as China attempts to teach Australia (and anyone else who’s watching) a lesson by imposing such economic damage on Australia that Canberra is forced to kowtow, China wants to break its continued dependence on Australian iron ore.

Its latest five-year plan sets ambitious goals for increasing China’s self-sufficiency, whether through its own iron ore production, the use of scrap steel as a feedstock or its wholly owned iron ore mines overseas.

The plan spells out that 2020 should mark the peak for China’s steel production, and output would decline from 2021 onwards. That’s partly to reduce its dependence on Australia as a supplier and partly to meet climate objectives laid down by Chinese President Xi Jinping.

China’s new bitterness about its dependence on Australia for iron ore is evident in commentary from the central economic agency—the National Development and Reform Commission (NDRC)—and in nationalist state-owned media, such as the English-language daily, the Global Times.

In June 2020, a Global Times editorial column declared: While there is no denying that China would face economic repercussions if it bans or restricts Australian iron ore imports, the Australian economy would definitely suffer more. It would be a big mistake for anyone to think that despite its dependence on iron ore China wouldn’t cut Australian imports.