New deal a step forward for China-Australia ties: analyst
Updated
Australian miner Resourcehouse has signed a $US60 billion coal deal with China. Resourcehouse has described it as Australia's "biggest-ever export contract." The company says it has negotiated a 20-year agreement to supply China Power International with 30 million tonnes of coal a year, from a mine in central Queensland. And while the contract has an approximate value of $3 billion a year, and create thousands of jobs for the state, environmentalists aren't so sure that the deal is good for Australia.
Presenter: Sen Lam
Speaker: Mark Pervan, head of commodities research, ANZ
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PERVAN: Look I think it is a positive step. I think we've seen in the last 12 months some uncertain sort of outcomes between China and Australia in regards to resources. But I think both parties realise long term that there has to be a very fruitful and sort of productive relationship going forward.
LAM: So in terms of economic spin-offs how great are the benefits for Australia?
PERVAN: Well I think very large, I mean Australia's really seen as China's quarry if you like, we can supply just about all the commodities that they need and they are net short most commodities. So the other issue too with the sort of the high end or the first end of the value chain is that you need to be close by, these tend to be resources that are fairly low quality in price but if you can source those materials nearby, like Australia as opposed to maybe North America and South America, that's even more attractive. So we are in a very unique position to supply a very strong demand backdrop.
LAM: As you say some see Australia as China's quarry. Are we perhaps too reliant on China in terms of natural resources exports?
PERVAN: Well look, interestingly enough Japan is still our largest natural resource export destination or market, so China is quickly catching up and won't be long before it passes. But, no, I think the mix is ok but I think going forward that question may be posed, but I think if anything the demand outlook looks so strong I suppose the concerns about that, i.e., that China were to slow down considerably, is not likely to be apparent probably for another 10 to 15 years at least.
LAM: And Mark do you think the deal perhaps signals a thawing of bilateral business relations, particularly after the case of China-born Australian business person Stern Hu who was detained by Chinese authorities for alleged business espionage. And of course Chinalco's rejected investment in the resources giant Rio Tinto. Do you think the signals are thawing in bilateral ties?
PERVAN: Yeah I think we're back on track to some degree. I think there was a bit of a learning curve there, particularly for China last year in how to deal in the international marketplace, particularly in resources. It's a very market-driven event, so they've found out there's some difficult lessons. But I think they're learning very quickly and they realise that going forward they can't afford to have those kind of soured relationships, these need to be a positive working environment. And we're going to be doing much more deals with China going forward so I think it is a good step.
LAM: Well you obviously think it's a good business deal. Do you understand why some environmental groups are quite concerned about it?
PERVAN: Well yes I mean mining by its nature can be quite environmentally sensitive. I think the mining industry here though is taking a lot of steps to address those issues, and it's not the same industry as it was 20 years ago. These kind of environmental concerns are high on the radar screen for the mining industry. An environmental impact study is done of all new projects, and in most cases they try to leave the tenements, or the mining operations, in better condition when they leave than when they first arrived.
