How China’s decarbonisation is reshaping Australia’s trade outlook

As the world’s second‑largest economy and Australia’s largest two‑way trading partner, China has shaped the structure of Australian exports for decades.  

Over the past 10 years, iron ore and concentrates have made up close to 60% of Australia’s goods exports to China, with Australia benefiting significantly from China’s demand for steel as it built homes, factories, railways and bridges.

ANZ’s Senior Commodities Strategist Daniel Hynes says the nature of Australia’s trade is changing as China pivots towards decarbonisation.

“There will be a clear shift in terms of the types of commodities China consumes and what it means for Australia. China’s continued expansion of its renewable energy sector will see demand for critical minerals rise,” said Hynes.

A structural shift

China’s latest five‑year plan places greater emphasis on strategic autonomy, technological independence and energy and supply‑chain security. This reorientation is already influencing commodity demand.

Hynes said that demand has been subdued in China’s traditional sectors such as property and infrastructure, seeing overall steel consumption in China fall by 4% last year.

“Infrastructure‑linked demand, while still significant, is no longer expanding at the rates seen in previous cycles. The property market has been the most pronounced source of weakness, with steel demand from the sector falling to around one-third of 2020 levels,” Hynes says.

Despite this, Hynes says China’s demand for steel - and iron ore - is not disappearing.

“While demand for iron ore and steel in China is expected to soften in the coming years, it won’t evaporate completely,” Hynes said. “We expect China’s demand for iron ore to plateau at around 1.3 billion tonnes over the next few years. However, given Australia’s low‑cost iron ore, we shouldn’t see a significant drop in demand.”

The rise of critical minerals

As China accelerates its decarbonisation plans and expands renewable energy capacity, demand is rising sharply for metals essential to clean energy technologies.

Investment in renewable energy in China nearly doubled over the past decade, despite being flat in in 2025, reinforcing strong demand for commodities such as copper, lithium and nickel.

Hynes says there will be a clear shift in the types of commodities China consumes and therefore what it means for Australia.

“We expect the next decade to be driven by China’s appetite for critical minerals, which are central to new sectors such as electric vehicles, solar and wind farms and data centres,” said Hynes. 

Encouragingly for Australia, the global demand for critical minerals such as copper, nickel and lithium has already been growing at higher rates over recent years.

Hynes also expects liquefied natural gas (LNG) to continue to play an important role as a transition fuel, supporting energy security as renewable capacity scales up.

“Australia’s energy sector should also see strong demand. LNG is considered a key transition fuel, bridging the gap between fossil fuel and renewable energy,” said Hynes.
 

Evolving demand

Lachlan Halstead, Country Head ANZ China, said customers are increasingly focused on securing access to critical minerals: “What we’re seeing from customers in China is a steady increase in investment tied to the energy transition.

“There is growing demand for critical minerals like lithium, copper and nickel to support renewable energy and electric vehicles, and securing long‑term, reliable access to high‑quality supply,” said Halstead.

Recent geopolitical events, alongside other global factors, have contributed to disruptions in trade flows and energy markets, placing greater emphasis on supply-chain security.

“Customers are placing greater importance on supply‑chain resilience and predictability as trade patterns evolve. Our role is to help them adapt and continue doing business with confidence in a more complex global environment,” said Halstead.

This year marks 40 years of ANZ in China. Since establishing a Representative Office in Beijing in the 1980s, the bank has continued to invest in the market. In 2010, ANZ became the first - and remains the only - Australian bank to be locally incorporated in China. This presence reflects ANZ’s strategy to support the movement of trade and capital for multinational clients around the region, and between its home markets of Australia and New Zealand.

ANZ has been awarded Best Bank – Corporate Banking in Asia, China in the Coalition Greenwich Voice of Client – 2025 Asia Corporate Banking Study for nine consecutive years.