Beijing is undertaking a colossal endeavor in the Sahara Desert, aiming to establish a mine that would serve as an alternative to Australian iron ore, a move seen as a strategy to mitigate risks associated with over-reliance on one source.
China Railway Construction Corp Ltd (CRCC), a major construction and engineering conglomerate, is spearheading the initiative, constructing a 6,000-kilometer railway line across Algeria’s North African desert. This ambitious project aims to grant Beijing-owned steel giant Baowu control over the Gâra-Djebilet mine, despite significant challenges.
The Gâra-Djebilet mine poses hurdles due to its remote and inaccessible location, compounded by the low quality of its iron ore, which contains excessive phosphorus levels detrimental to steel production. However, Chinese media sources suggest that these challenges have been overcome, making substantial investment in the mine and associated infrastructure feasible.
China’s motivation stems from its heavy reliance on Australia and Brazil for iron ore, essential for steel production. Diversifying sources by tapping into the Gâra-Djebilet mine’s reserves of approximately 3.5 billion tons could enhance Beijing’s strategic position. With China being the world’s largest steel producer, such diversification becomes imperative.
Algeria, eager to diversify its economy amid declining global demand for oil, sees the project as an opportunity to bolster its trade and economic vitality. A significant portion of the investment deal, totaling US$36 billion, was struck during Algerian President Abdelmadjid Tebboune’s visit to Beijing, highlighting the mutual benefits both countries envision.
Despite challenges, work on the railway line has commenced, signaling progress toward establishing a vital link between the mine and key industrial centers. However, China’s move to “de-risk” its economy by seeking alternative iron ore sources could have repercussions for Australia. Chinese investment in Australia’s mining sector has declined, reflecting Beijing’s shifting investment priorities toward Belt and Road Initiative countries and Southeast Asia.
While China’s interest in Australian agricultural products remains, the slow response from the industry following Beijing’s coercive tariffs during the COVID-19 pandemic underscores the complexities of the economic relationship between the two countries.
