China's state iron ore buyer gets down to business, yet to flex pricing power

China's new state iron ore buyer is asserting itself in negotiating deals for the world's biggest steel industry but has yet to help manufacturers struggling with weak demand to get lower prices, mills and miners said.

Around 30 Chinese steel mills have signed 2023 iron ore procurement contracts through China Mineral Resources Group (CMRG), which was set up last year to buy iron ore on behalf of the industry as well as oversee Chinese interests in mines abroad and at home.

"We have not received any cheaper iron ore prices and to be honest I don't expect they can get better deals any time soon," a purchasing manager from a state-owned Chinese steel mill said on the sidelines of an industry event in Singapore this week.

"CMRG looks like an updated version of a previous collective buyer agency," said the person, who like other mills and miners declined to be named given the sensitivity of the matter.

China, the world's top steelmaker, buys about 70 per cent of all iron ore shipped worldwide, mostly from Australia and Brazil.

A portion is bought at the start of the year under term contracts, with the rest bought later on the market.

CMRG is China's latest attempt to enhance its iron ore pricing power. Previously, China's steel industry association strived to win better prices for mills, negotiating fixed prices annually with miners until the industry moved to an index-based price system more than a decade ago.

Chinese steel mills are eager to reduce their iron ore procurement prices as profit margins take a hit from a slower than expected recovery as the country eased strict COVID-19 restrictions after three years.

"We are actively engaging with CMRG when it comes to negotiating contracts for steel mills," an official at one of the world's top miners told Reuters. "But after the negotiations are done, we have to sign individual contracts with mills."

NO 'MARKET-SHAKING' CHANGE