Federal Labor has challenged the Abbott government to clarify the terms of Australia's free trade agreement with China, after the survival prospects of Australian iron ore miners were further imperiled by China's decision to cut the tax rate imposed on its own iron ore miners.
Speaking after the Chinese State Council revealed it would reduce taxes on miners by 40 per cent, shadow foreign affairs minister Tanya Plibersek urged the government to publish the terms of the trade agreement that was struck four months ago.
"The Abbott government needs to explain what it is doing to ensure Australian businesses have genuinely fair access to the Chinese market," she said.
Agreed in November, the free trade agreement is not expected to come into effect until later this year, with the Australian and Chinese governments yet to complete all the necessary paper work on the deal.
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"Labor renews its call for the Abbott government to release the text of the FTA so Australian industry and the broader community can assess whether it delivers promised benefits," said Ms Plibersek.
Trade Minister Andrew Robb declined to comment.
There was debate on Thursday as to how much the new subsidy would help Chinese iron ore miners, with some estimating it to save them $A1.27 per tonne, while Tim Murray from China-based research firm J-Capital said it would be closer to $US4 per tonne.
But with iron ore prices now below $US50 per tonne, any support to Chinese miners will make it harder for Australian miners to survive.
Indeed, the subsidy comes just days after the Western Australian government started offering royalty relief to mid-tier miners like BC Iron, and just months after foreign miners accused the Reserve Bank of Australia of trying to save local miners by cutting interest rates and devaluing the local currency.
Mr Murray said the tax subsidy effectively reduced the cost of iron ore for China's state-owned steel mills, and so did not necessarily cost the Chinese government anything in the long run.
"It probably gives a net break even for the Chinese government from providing these subsidies, so you can see it is a sensible policy move from a centrally controlled economy point of view," he said.
Mr Murray said the subsidy would allow many private iron ore miners in China stay open, and could be an indication the Chinese government will increase support to its domestic miners.
"This could be a signal they will give increasing support to the mining sector in general in China in the face of low commodity prices. We have seen similar actions taken in the coal sector over the past two years as prices have fallen and domestic coal mines have been making losses, we are seeing the same happening now for domestic iron ore mines," he said.
"There is speculation there is further assistance coming their way.
"I have met with probably 20 Chinese domestic iron ore mines over the past six months, and every [state-owned] mine, with one exception, was either maintaining or increasing their output over the next 12 months."
China's move echoes a prediction by former BHP Billiton executive, and now Orica boss Alberto Calderon, who forecast last year that low iron ore prices would force Australian miners rather than Chinese miners out of business.
BHP and Rio Tinto are the only Australian miners making a clear profit at current prices.
BC Iron managing director Morgan Ball said his company broke even in the March quarter and he was not particularly concerned by the Chinese subsidy.
"The reading I have done and the commentary I have seen suggests that it won't actually make a significant difference as far as the viability of the Chinese domestic operations is concerned, it is a relatively small assistance to them," said Mr Ball.
"Our government has done a similar thing hasn't it with royalty relief for BC Iron so it is part of capital markets ... maybe it will help domestic producers on the margins, but if economic rationalism applies it won't make a big difference to those mines that are currently under water, but that is a big 'if' of course."
For comparison, BC Iron reduced its cost of producing iron ore, excluding freight and corporate costs, in the March quarter by $5 per tonne compared to the March quarter of 2014.
The company expects to lower that cost of production again in coming months, and Mr Ball said BC Iron was almost certainly in the black during the March quarter.
"Subject to finalising our quarterly accounts we are anticipating that we were operationally cash flow positive for the quarter," he said.
BC Iron will publish its full quarterly results later this month.
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