After negotiations on a long-term contract ended in a stalemate, Chinese state-owned iron ore trader China Mineral Resources Group has urgently instructed domestic steel mills to suspend the buying and use of BHP Billiton’s flagship 60.5 percent Fe Jimblebar fines, which has always been a favorite of Chinese steel mills, according to anonymous sources. It is said that China’s Iron and Steel Association also supports this appeal.
On September 18-20, Chinese steel mills first announced they had received the notice to stop purchases of BHP Billiton’s iron ore in dollars, except for material which had already reached ports. This had failed to bring results in negotiations, so this week Chinese steel mills have been asked to stop all purchases of BHP material in both US dollars and the Chinese currency. BHP Billiton’s shipments of iron ore to China are said to have plummeted by 30 percent in just one week.
In early May this year, BHP Billiton and China had disagreed over the pricing mechanism as BHP insisted on an average annual price of $109.5/mt, while China wanted pricing based on the spot rate, while adjusting premiums on a quarterly basis. The iron ore portside spot price is $15/mt lower than in the previous year.
In 2024, 60 percent of China’s imported iron ore came from Australia. BHP Billiton’s Jimblebar mine supplies 60 million mt of iron ore to China per year.
Following suspension of purchases of BHP Billiton’s Jimblebar fines, China has purchased more iron ore from Vale of Brazil. Moreover, the Simandou iron ore mine in Guinea will ship its first cargo in November, which is expected to deliver 120 million mt of high-grade iron ore to China annually.
Additionally, the proportion of low-grade ore used by Chinese steel mills has increased from 20 percent to 35 percent recently.
