Chinese demand for the Pilbara's premium-grade iron ore looks set to strengthen on the back of tougher air pollution standards imposed by Beijing.
The country's smog crisis, which has sparked a community backlash and forced official action, is likely to see steel, cement and electricity producers pressured to source purer raw materials to meet emission standards, Reuters has reported. The news agency has quoted trade officials predicting that new air pollution standards could squeeze out iron ore suppliers from Iran, Mexico and Vietnam.
The switch would favour exporters from Brazil and Australia, which supply top-grade raw materials.
"Mills used to take cargoes with various grades as long as they were cheap and never questioned about minor ingredients, but more and more customers are starting to look into the specs before buying," Reuters quoted one Beijing iron ore trader as saying.
Minnow iron ore-exporting countries have boosted trade with China as the Asian economic giant seeks to diversify its source of raw materials.
Iran, which last year was China's fourth-biggest source of iron ore behind Australia, Brazil and South Africa, had lifted deliveries almost a third in the past year.
But Reuters has reported that Iranian ore contains up to 1.5 per cent sulphur, which contributes to smog. Sulphur levels in Indonesian and Mexican ore can reach 2 per cent, compared with 0.05 per cent in ore from Pilbara powerhouses Rio Tinto and BHP Billiton, and Brazil's Vale.
Australia's market share rose 4 percentage points to account for 51.2 per cent of China's total imports in 2013. Brazilian operators claimed a 19 per cent share.
"More supplies from Australia and tougher environment protection measures will eventually force non-mainstream suppliers to either cut prices or shut down production," an iron ore purchasing mill official told Reuters.
Beijing's clampdown has concentrated on the province of Hebei, which generates a quarter of total steel output and is considered responsible for most of the capital's smog.