Commodities
China's state iron ore buyer agrees new supply deal with Rio Tinto after talks were frozen in August
China Mineral Resources Group told some steel mills of the agreement on Wednesday, Reuters reported, but price, volume and duration were not disclosed.
HedgeWeekly News Desk ·
China Mineral Resources Group, the state body that buys iron ore on behalf of Chinese steelmakers, has agreed a new supply contract with Rio Tinto, Reuters reported on Wednesday, citing people with knowledge of the matter. CMRG informed some mills of the agreement verbally on Wednesday without giving details and will start collecting data from Thursday on how much Rio Tinto ore each mill needs to buy. Neither CMRG nor Rio Tinto responded to requests for comment, and pricing, volumes and contract length were not disclosed.
The deal follows a freeze of more than two months. In early August CMRG told some mills to suspend negotiations with Rio Tinto over shipments from September, according to Reuters reports at the time. That news lifted the most-active Dalian iron ore contract 2.57% to 719 yuan a tonne and the September Singapore Exchange contract 2.15% to $96.45 a tonne, SteelOrbis reported on August 6.
Beijing set up CMRG in 2022 to centralise iron ore purchasing and win better terms for steelmakers squeezed by thin margins and weak domestic demand; Wood Mackenzie estimates it now negotiates for more than half of China's annual imports. BHP confirmed a deal with the buyer in April after a months-long standoff, without disclosing terms, while Fortescue was then reported to be close to a long-term agreement and had moved to price its ore against an average of the Mysteel and Argus indexes.
For investors in the big Australian miners, the agreement shows CMRG can hold back purchases from a top supplier for months and still settle on its own timetable, a shift in bargaining power that Rio Tinto's iron ore chief acknowledged in August when he said growing global supply had moved leverage away from producers. The undisclosed terms are the main gap: watch whether Rio Tinto moves onto Chinese price benchmarks as Fortescue did, how volumes are allocated once CMRG has gathered mill demand, and what Rio Tinto itself says about the contract.