China’s Belt & Road Initiative (BRI) is China’s answer to US trade tariffs and a later economic war because it connects China with its resource supply routes and delivery modes to Asia , Middle East, Russia, Africa and Europe. Of Course the obvious exclusions are the Americas.
Thousands of kilometres of rail, road power and pipelines together with the associated ports and infrastructure ensures a growing Chinese demand for steel and by implication met coal for a generation. While US import steel tariffs may temporarily slow the coking coal global demand, the BRI demand will readily negate this temporary threat, IMO, and continue demand by the current 8% growth.
At present Australia supplies about 40% of seaborne coal and we have to be careful that the BRI program does not preclude us from the Chinese market because of our Government’s stupid support for Trump and his America First populist policies.
Note that the BRI seaborne routes only extend south to Indonesia. Indonesia is already a major coal supplier of seaborne coal and further Chinese investment in Kalimantan could see its output doubled within a decade providing direct competition to Australia’s sizeable share of seaborne products.
Cokal ( ASX: CKA) is starting to mine and ship high quality PCI followed by HCC later this year, North Eastern Russia is also launching itself on the seaborne coking coal market in the form of Tigers Realm Coal (ASX: TIG) who this year produced over 400K ton and has plans to eventually export up to 10 million ton of coking coal to nearby Asian markets from its massive 630 million ton Amaam resource.
Mongolia & Africa are also emerging as low cost Chinese and Asian coking coal suppliers providing further competition to Australia dominant seaborne market share.
The old argument that Australia can’t produce steel competitively because of our labour input costs is quickly becoming obsolete because steel making is becoming more automated and labour inputs in Korea, Japan & Germany have already overtook Australia and China is rapidly closing in.
We have spent a silly $60 billion taxpayers funds on an already obsolescent Broadband rather than connecting western Queensland’s coal fields and the Pilbarrairon ore region with a rail link to move coking coal west and iron ore east with mega steel mills at both ends. As such we could diversify trade away from China, support the AUD, add Aussie value and better balance our trade. Like Korea, Japan & Germany, we can then grow steel dependant manufacturing industries around these steel manufacturing hubs.
If Japan can buy Aussie iron ore & coking coal, ship it to Japan, make steel and then deliver steel & steel products to Western markets with a cost of labour equal to or greater than ours, then why can we not do so when we own the raw materials? When we had our car manufacturing, Japan supplied the specialist steel for the car bodies.
We have had the ‘Can´t bat, can’t bowl” syndrome which has been promoted by foreign multinationals who just want to dig up and ship our raw resources and pay little or no Aussie tax. Not a bad gig while it lasted!
Our forefathers built the Sydney to Perth railway a hundred and fifty years ago with picks, shovels and hard yakka and we now think that we could´t do the same in the North with all the sophisticated hi tech machinery and 21st C engineering techniques.
Perhaps we should get a Chinese quote & $15 million a kilometre…eh and then crib about Chinese immigrant labour? What are we!
We have bred a generation of millennial who would rather sit at home playing silly war games on their NBN computers rather than getting off their arses and doing something worthwhile for the Country.