China is moving to consolidate the country’s iron ore imports through a new centrally controlled group by the end of this year, as Xi Jinping’s administration seeks to increase Beijing’s pricing power over the industry.
According to the Financial Times, the initiative, led by the China Iron and Steel Association and the planning ministry, involves large state-owned mining and steel groups such as Baowu, China Minmetals Corp and Aluminium Corporation of China.
China is the world’s biggest consumer of iron ore with its 1bn-tonne-a-year steel industry absorbing about 70% of global production, most of it supplied by Australia. Any move to gain control over prices will probably alarm Canberra given iron ore’s status as the country’s top export. Beijing hopes the new entity can secure lower prices through larger bulk purchases made on companies’ behalf. The project will also seek to boost domestic iron ore output and organise bigger investments in overseas mines.
Government officials and policy advisers told the Financial Times that Xi’s administration had grown frustrated by large price swings over recent years in an industry dominated by Australian producers such as Fortescue Metals Group and BHP, which are likely to be highly concerned by the move. When Beijing sought to punish Australia after Canberra called for an international investigation into the origins of the Covid-19 pandemic, Chinese buyers boycotted Australian goods ranging from coal and rock oysters to wine. But they could not find enough alternative sources for iron ore, the key raw material needed to make steel.
“The [world’s biggest] iron ore suppliers will have no one else to turn to when it comes to serving the world’s largest market.”Beijing-based policy adviser
“The [world’s biggest] iron ore suppliers will have no one else to turn to when it comes to serving the world’s largest market,” said a Beijing-based policy adviser, who asked not to be named. “That would force them to give us a discount.”
Source: the Financial Times