China Mineral Resources Group (CMRG), the state-run iron ore trader, has reportedly instructed domestic steel mills to temporarily halt the use of a popular iron ore product from BHP Group. This directive follows unsuccessful negotiations concerning long-term supply contracts, according to sources familiar with the situation. CMRG was established three years ago by Beijing to strengthen its pricing influence within the global iron ore market. The company aims to shift bargaining power from major producers, including BHP, Rio Tinto, and Vale, towards China, the world’s largest iron ore consumer.
The instruction to suspend purchases specifically targets BHP’s Jimblebar blend fines, with the suspension expected to begin next week. The China Iron & Steel Association has also echoed this recommendation. Sources who requested anonymity due to the sensitivity of the discussions, noted that while neither CMRG nor the Association possesses direct regulatory control over individual steelmakers’ commercial activities, the recommendation is effectively binding. This is largely due to CMRG’s significant political influence and its direct reporting lines to high-ranking government officials.
This action highlights China’s ongoing efforts to enhance its negotiating position with leading global iron ore suppliers, advocating for more favourable terms for its substantial steel industry. The move is seen as a strategic effort by CMRG to exert greater control over iron ore pricing and supply dynamics. BHP Group is a major global resources company that extracts and processes minerals, oil, and gas. They are among the world’s largest producers of commodities such as iron ore and coal.
The situation remains fluid, and the long-term implications for both BHP and the Chinese steel industry are still uncertain. Whether this suspension will lead to a renegotiation of contracts or a more protracted dispute remains to be seen. Market participants will be closely monitoring developments to gauge the potential impact on iron ore prices and trade flows.
