China Mineral Resources Group, the nation's new centralized buying agency for iron ore created in July 2022, has not become the market control mechanism that some had predicted. Economic factors – including within China itself, together with the weather – continue the real price setters for commodity ore.
When it was launched, CMRG's remit was to enhance China's iron ore supply capability and improve its iron ore pricing power, according to the official launch statement. The world's largest steelmaker, China is more than 80% dependent on imports of the primary steelmaking ingredient, and decarbonization means steelmakers now need higher-quality, premium-priced iron ore at the most economical prices possible.
"China's desire, as the largest importer of seaborne iron ore, to have stronger influence in pricing is understandable," according to Will Chin, head of commodities at Singapore Exchange, which pioneered the world's first cleared iron ore swap in 2009. China consumes 70% of the world's seaborne iron ore – a market trading 1.5 billion mt/year.
"We look forward to working with CMRG to provide enhanced transparency in price signals reflecting the symbiotic China onshore and seaborne iron ore markets," Chin said.
Securing those supplies means negotiations with the big four iron ore miners: Vale, Rio Tinto, BHP and Fortescue Metals Group, which, as CMRG points out in the launch statement, together control around 70% of the market. Specific supply contracts or accords have been set up between the Chinese agency and Vale as well as BHP. But there are no signs of a return to the long-term contract system that dominated the global iron ore industry for a 40-year period until 2009, when the world's biggest steelmakers and iron ore miners indulged in annual "mating" seasons to set prices for the whole year for everybody else, too.
