Australia faces ‘downside risks’ from slowing Chinese economy
He spoke to Today after new figures showed that production at Chinese factories in October fell more than expected.
“The Chinese economy is starting to slow down for both cyclical and structural reasons and the housing sector, which makes up a large part of their economy, has also experienced some slowdown,” Frydenberg said.
“Coal supply constraints have led to price spikes, energy rationing in some provinces and a slowdown in industrial production,” Frydenberg said.
“The Chinese government’s limits on steel production have also contributed to the decline in activity levels.”
But Mr Frydenberg also said the fall in the price of iron ore – a vital mineral for steelmaking – was a major concern for Australia.
Last year, the iron ore export market was worth $ 125 billion to the Australian economy, with China buying about 70% for its steel plants.
This year, prices peaked at an all-time high of $ 233 on May 12, but since then the price has fallen to around $ 100.
Mr Frydenberg told Today the federal government is preparing for that price to drop even further by next March.
“We have a pretty conservative estimate of the price of iron ore in our budget at $ 55 a tonne. So we actually built buffers there.”
Declining residential construction projects in China will lead to lower demand for infrastructure such as bridges, shopping malls and roads.
Meanwhile, Botswana’s first iron ore mine has started production and delivered its first exports to China, Reuters reports.
Evergreen freighter larger than Ever Given is heading for the Suez Canal
The first exports from the Ikongwe mine reached China last month.