Key Points
- China’s state buyer, CMRG, is blacklisting products to pressure miners like BHP.
- The goal is to lower iron ore prices for China’s struggling steel industry.
- Some Chinese mills report that CMRG has raised their costs through commission fees.
- A new China-backed mine in Guinea is expected to give Beijing massive leverage by 2028.
China’s state-run iron ore buyer is using aggressive tactics to gain control over the massive $132 billion global market. The buyer, known as China Mineral Resources Group (CMRG), is seeking to pressure mining giants like BHP into offering better deals to Chinese steel mills. These mills have long complained about the huge profit margins that miners enjoy, especially when the steel industry itself is losing money.
The standoff has gotten more intense recently. CMRG reportedly instructed its steel mills and traders to cease purchasing a second type of iron ore from BHP. This move came just a few months after it blacklisted a different BHP product. This marks the first time the state buyer has banned multiple products from a single supplier, showing that it is willing to play hardball to get what it wants.
However, the results so far are mixed. Some Chinese steelmakers have complained that CMRG hasn’t actually lowered prices. In fact, they say the state buyer charges its own commission fees, which makes the ore even more expensive.
Ceding control of negotiations was a difficult decision for these companies, but they had little choice, as it was regarded as a “political task.”
While CMRG has struggled to make a big impact on prices, it has found some success in other areas. It helped smaller mills get access to credit and secured small shipping discounts from another miner, Rio Tinto.
The real game-changer, however, is on the horizon. A large new iron ore mine, Simandou, is scheduled to open in West Africa in 2028. Chinese companies are the biggest investors in this project.
Once it starts producing, it will flood the market with a huge new supply of ore. This surplus is expected to drive prices down and finally give CMRG the leverage it needs to dictate terms to the world’s biggest mining companies.
