As the sun sets, a 300-metre Chinese ship chugs into Port Hedland, Western Australia, to re­ceive a fresh load of iron ore.

It is one of about 20 vessels waiting to dock in the congested port before heading back to China in a constant, year-round cycle. Iron ore, an essential ingredient in steel, is soon set to overtake coal as resource-rich Australia’s top export. It is also at the heart of its commercial relationship with China and has driven a big upsurge in Australia’s terms of trade – the ratio of export to import prices.

As Julia Gillard, the prime minister, visits Beijing this week, trade links with China, which two years ago became Australia’s top export market, have never been more important.

Nobody expects Ms Gillard – who is meeting Wen Jiabao, her Chinese counterpart, on Tuesday, and President Hu Jintao on Wednesday – to take the same stance as her predecessor Kevin Rudd, the fluent Mandarin speaker who damaged diplomatic ties during a 2008 visit with his strident criticism of China’s human-rights record.

Tensions between Canberra and Beijing have not held back strengthening links. The number of Chinese tourists visiting Australia hit a monthly record of almost 48,000 in January, more than 50 per cent up on a year earlier, while immigration from the Chinese mainland rose 15 per cent to almost 15,000 in the year to June 2009, Australian figures show.

But it is in the resources and energy sectors, particularly in Western Australia’s Pilbara region, where China’s presence has become most stark.

Lindsay Copeman, acting head of the Port Hedland port authority, says that 10 years ago Chinese shipping was an operational hazard.

“They used small ships, old ships that were poorly crewed. . . They were basically rust buckets,” he said. “Today they are sending big modern ships.”

China now accounts for almost two-thirds of the port’s export tonnage. The trade is driving huge development at Port Hedland,Pilbara’s largest town with a population of about 22,000.

Port Hedland shipped 174m tonnes of iron ore in the 12 months to the end of June last year. Port officials estimate that by mid-2016, the figure could reach 500m tonnes annually.

“On average, we have 18 to 20 ships waiting to come into harbour” said Mr Copeman. “In 2016, we estimate we will have 80 to 100 ships anchored off the coast.”

Michael Wesley, executive director of the Lowy Institute, a Sydney think-tank, says China’s impact on the nation is best expressed by comparing Australia with New Zealand. “The two countries had similar levels of per capita wealth in the 1970s and it has diverged markedly since that time,” he said. “China’s impact on Australian wealth in recent years has been enormous. . . We are looking at a boom like we have never seen before in our history.”

Such confidence has encouraged investment in Australia’s energy and resource states of Western Australia and Queensland, and an increase in the number of Australian projects backed by China.

After Canberra rebuffed a number of planned take­overs of Australian re­source companies, China focused on taking stakes in mining and energy projects, buying minority holdings in market-listed groups such as Rio Tinto, and project financing.

The big risk for Australia is if China’s growth rate falls sharply, hitting de­mand for commodities, and therefore prices. Australia is also vulnerable to large competing resource projects coming on stream in Latin America, Asia and Africa.

For now, such risks seem some way off . In the meantime, Australia is rushing to sell more commodities while prices remain high.

Barry Haase, a MP for Durack, which includes Port Hedland, says China has given his constituency vital oxygen. “Without China, we would be selling less and therefore developing less iron ore and liquefied natural gas,” he said.

Additional reporting by Leslie Hook

Get alerts on Chinese business & finance when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article