Iron ore Photo:VCG

Chinese experts on Monday said that the reported approval by the Australian government of an iron ore project jointly developed by Rio Tinto and China Baowu Steel Group is a positive signal for mending the two countries' past fraught relationship. It is hoped that Australia will do more to help restore mutual trust and get the win-win partnership back on track, they said.

Australia has previously been sensitive to Chinese investment in its key iron ore sector, but the approval indicates that there is no security concern about cooperating with Chinese companies and China is an indispensable economic and trading partner for Australia, Zhou Fangyin, a research fellow at the Guangdong Institute for International Strategies, told the Global Times. 

The Albanese government has approved the involvement by state-owned giant China Baowu in an AU$2 billion ($1.38 billion) iron ore joint venture, the biggest Chinese investment in Australia since 2019, media outlet The Australian reported on Friday.

Per an earlier statement released by Rio Tinto in September 2022, the iron ore giant will invest AU$1.3 billion and hold a 54-percent stake in the Western Range iron ore project, while Baowu will invest AU$700 million and hold the rest of the equity in the project.

Australia used to try to diversify its export destinations, but it is hard to find another market as large as China, Zhou said, adding that cooperation with China is in line with the real interests of Australia.

Chinese companies' investment in Australia has fallen since 2016, as the previous Morrison administration adopted a hostile attitude toward Chinese capital. Zhou noted that the latest approval is a "positive signal" for restoring the win-win relations.

In the meantime, it is hoped that Canberra will inject more positive energy into bilateral economic and trade cooperation, experts said.

According to a statement released by China Baowu on its official WeChat account, senior executives from both companies held a video conference on Friday, exchanging opinions on deepening cooperation in areas such as iron ore and carbon neutrality.

As China-Australia ties gradually thaw, it is believed that bilateral cooperation will come back to normal track, Chen Derong, president of Baowu, said.

Despite the fallout from COVID-19 and other factors, the cooperation between China Baowu and Rio Tinto has become increasingly close over the past two years, Chen said, noting that instead of simple trading in goods, it is crucial to enhance cooperation in production and manufacturing for the two sides.

As the world's biggest steelmaker, Baowu has an annual production capacity exceeding 100 million tons. With the promotion of Baowu's global layout, it is foreseeable that its demand for iron ore in the future will be substantial, Chen added.

Baowu is the largest client of Rio Tinto. "We have enjoyed a strong working relationship with Baowu for more than four decades, shipping more than 200 million tons of iron ore under our original joint venture," Rio Tinto Iron Ore Chief Executive Simon Trott said in a statement.

Rio Tinto and Baowu have also concluded an iron ore sales deal at market prices covering a total of 126.5 million tons of iron ore over approximately 13 years, Rio Tinto said. 

Construction of the project is expected to begin in early 2023 with production starting in 2025.