The State Mineral Buyer of China has ordered the main steel manufacturers and merchants that temporarily suspend the purchases of all the new BHP Group shipments, which intensifies a price dispute that runs the risk of altering one of the most important commercial associations of the mining giant.
China Mineral Resources Group, created by Beijing to reinforce the country’s influence on the world of iron ore, pThis week idió to national buyers who suspend purchases of any maritime cargo called in BHP dollarssaid people familiar with the matter, who asked not to be identified since they are private deliberations.
This means that new agreements cannot be signed, even for cargoes that have already left Australia, where BHP has its mines. The only BHP iron mineral available for trade are some supplies that have arrived in China and whose price is quoted in yuan. The decision was taken after several meetings between both parties since the end of last week that did not give results, according to the sources.
China is, by far, the main world consumer of iron mineral, while BHP, the largest mining in the world, is one of the three main suppliers that supply most of the material to the country’s steel. The leaders of Asia’s largest economy have been more willing to take advantage of their influence on raw material markets, imposing prohibitions of Australian raw materials at the beginning of this decadeas well as rare earth export controls this year.
“Would China have done this a decade ago, when it depended largely on imports? Not talking!”, Said Tom Price, Analyst of Panmure Liberum. The difference is now that the Chinese Steel demand is moderating and a new wave of iron ore supply from the gigantic Simandou mine in Guinea is coming and aheadhe added.
The new restriction involves a escalation regarding the suspension of the fines of the Jimblebar mixture of BHP earlier this month and highlights Beijing’s determination to gain greater influence on prices. Founded three years ago, CMRG has been responsible for changing the balance of power in negotiations, from miners such as BHP, Rio Tinto Group and Vale SA towards the vast Chinese steel industry.
The above restrictions have also hardened, according to the sources. CMRG has ordered allegations not to accept Jimblebar cargoes in Chinese ports or buy such market in the market in cash called in yuan. The measures have driven some farmes to adjust their production parameters to adapt them to alternative minerals.
Singapore iron ore futures rose 1.8%, to US $ 105.05 per ton. BHP’s shares fell up to 4.8% in London, their greatest fall since the beginning of April.
CMRG did not respond to comments requests. A BHP spokesman said the company could not comment on trade agreements.
