Beijing’s creation of a new state-owned company to centralise China’s purchases of iron ore and other metal resources is unlikely to have much impact while markets are tight and prices are high, but it could become a weapon against Australia in the event of an iron ore glut.
The China Iron and Steel Association (CISA), which is the government-sanctioned body representing China’s major steel companies, has long railed against what it sees as an iron ore producers’ cartel and pushed for a central buying agency to counter it.
The four biggest suppliers of seaborne iron ore—Rio Tinto, BHP, Fortescue Metals and Brazil’s Vale—account for about 70% of world trade and about 80% of China’s imports.
China’s nationalist English-language daily, the Global Times, said the goal was ‘to create a centrally administered state giant to have a bigger say in ore pricing by leveraging China’s strength as the world’s largest consumer of iron ore’.
The new China Mineral Resources Group, launched last month, has been granted significant start-up capital of ¥20 billion ($4.2 billion) and has a high-powered leadership team. Its chair is Yao Lin, outgoing chair of Aluminum Corporation of China, or Chinalco, and its operations are headed by Guo Bin, former vice president of the world’s biggest steelmaker, China Baowu Steel.
BHP has responded sceptically to the new venture. Chief Financial Officer David Lamont noted that China’s previous efforts to negotiate iron ore prices with a single voice hadn’t been successful.
