China’s state-run iron ore buyer has told major steelmakers and traders to temporarily halt purchases of all new BHP cargoes, widening an earlier curb as contract talks have stalled, according to people familiar with the matter.
China Mineral Resources Group, created by Beijing to bolster the country’s sway in the global iron ore trade, asked domestic buyers this week to suspend purchases of any US-dollar-denominated seaborne cargoes from the Australian miner, the people said, asking not to be identified discussing private deliberations.
Chinese demand for iron ore, a key ingredient in steel production, has been instrumental in Australia’s economic prosperity.Credit: Bloomberg
The decision followed several meetings between the two sides since late last week that failed to produce results, they said. CMRG didn’t respond to requests for comment. A BHP spokesperson said the company couldn’t comment on commercial arrangements.
BHP shares fell as much as 5 per cent on the London Stock Exchange overnight before closing 1.9 per cent lower. It sets the stage for an uncertain session for BHP on the Australian stock exchange on Wednesday.
Iron ore futures in Singapore added 2 per cent before retreating to be 0.5 per cent higher at $US103.55 a tonne.
China is by far top the consumer of iron ore globally, while BHP, the world’s biggest mining company, is one of three giant suppliers that provide the bulk of the material to the country’s steelmakers.
BHP is one of the leading providers of iron ore to China’s steelmakers.Credit: Trevor Collens
The new restriction marks an escalation from the halt on BHP’s Jimblebar blend fines earlier this month, and highlights Beijing’s determination to gain greater influence over prices.
Established three years ago, CMRG has been tasked with shifting the balance of power in negotiations from miners such as BHP, Rio Tinto and Vale to China’s vast steel industry.