China’s state-run iron ore trader has directed steel mills to temporarily cease the use of certain iron ore products from the BHP Group. This decision follows a breakdown in negotiations regarding long-term contracts, according to sources familiar with the matter. The China Mineral Resources Group (CMRG), established by the Chinese government to enhance pricing power in the global iron ore market, has advised mills to suspend purchases starting next week.
The recommendation has significant weight, as it is supported by the China Iron & Steel Association (CISA). Although neither organization possesses formal authority over individual steelmakers, CMRG’s political influence and direct connections to government officials make its guidance effectively binding. This move signals China’s determination to secure more favorable terms for its vast steel industry.
CMRG, formed three years ago, aims to shift negotiating power away from major producers such as BHP, Rio Tinto Group, and Vale SA toward China, the largest buyer of iron ore globally. As part of its strategy, CMRG has sought to stabilize the market and mitigate price volatility. The organization has been pushing for direct purchases from miners under long-term contracts at reduced rates, although progress has been limited.
Several large state-owned steel mills have already withdrawn orders for Jimblebar cargoes, one of BHP’s key mines in Western Australia. These mills are also considering storing shipments in bonded port zones rather than clearing them through customs. The Jimblebar mine supplies ores containing about 60 percent iron, which are crucial for Chinese sintering blends.
On March 15, 2024, futures for iron ore on the Singapore exchange rose as much as 1.3 percent, before settling slightly lower at USD 106.50 per ton by 16:14. Meanwhile, iron ore priced in yuan on the Dalian Exchange increased by 0.9 percent.
In light of these developments, the China Iron & Steel Association convened a meeting in Beijing on Thursday to assess current market conditions. The gathering aimed to prepare for a new port-side spot index for imported iron ore. The industry has been working on developing a local benchmark to decrease reliance on global pricing measures, such as the S&P Global Commodity Insights Platts index.
Senior trading executives from major Chinese mills and trading houses participated in the meeting, highlighting the industry’s proactive approach to addressing market challenges and securing better pricing terms. As China continues to navigate its iron ore supply chain, the decisions made now will likely have lasting impacts on the global iron ore market in the months to come.
