China's state iron ore buyer has directed some steel mills to halt negotiations with Rio Tinto (RIO.AX), (RIO.L) for shipments from September, two sources with knowledge of the matter said, escalating pressure on the world's top iron ore producer during annual supply talks.
China Mineral Resources Group (CMRG) has increasingly used its buying power to wrest better terms for its steel makers by restricting purchases from big iron ore miners while contract talks are underway.
In the run-up to the expiry of annual supply deals, miners typically discuss with customers their desired volumes and specific cargo and shipment dates for the next year, a trader said. CMRG has asked some mills not to settle those details, they said.
LARGER PROCUREMENT VOLUME
CMRG is negotiating for more than half of China’s annual import volumes, according to commodity research group Wood Mackenzie's estimates.
The push to stall talks with Rio Tinto was aimed at pressuring mills that have not given up negotiation rights to CMRG to do so, two traders and an analyst said, which would hand the state-run trader a larger procurement volume and boost its bargaining power.
The most active iron ore contract on China's Dalian Commodity Exchange (DCE) closed daytime trade up by 2.57% to the highest since July 31 at 719 yuan ($106.54) per metric ton, while the benchmark September iron ore on the Singapore Exchange jumped 2.15% to $96.45 a ton as of 0823 GMT, also the highest since July 31.
CMRG has already targeted Australia's other top iron ore producers — BHP (BHP.AX), Fortescue (FMG.AX) and privately held Hancock Prospecting, owned by Australia's richest person, Gina Rinehart.
Australia supplies more than half of China's iron ore imports, making it by far its largest source of the steelmaking ingredient, and the material is Australia's most valuable commodity export.
CMRG did not immediately reply to a request for comment. Rio Tinto declined to comment.
UNDER PRESSURE
BHP faced progressive purchasing bans on some products through late 2025 and early 2026 as its annual term contract negotiations dragged on. Restrictions were lifted following a visit by its then incoming CEO Brandon Craig in April.
Meanwhile, a top executive at Fortescue last week said CMRG's actions were undermining China's stable iron ore supply.
Rio Tinto had been seen as insulated from some of that pressure given its largest shareholder is China's state-owned Chinalco, which also leads the consortium partnering Rio Tinto in the Simandou iron ore project in Guinea.
However, this week its chief executive of iron ore, Matthew Holcz, said negotiating leverage has shifted away from iron ore producers as growing supply has balanced the market.
Holcz said tension was always present between buyers and sellers, but Rio was focused on long-term ties and "win-win" opportunities.
Australia's major miners and their lobbyists have asked Canberra for help in pushing back against Beijing's efforts, including raising the prospect of a single selling desk for the country's most valuable commodity export.
But the view from at least one miner was that Canberra has been trying to repair its relationship with China so might not want to take up this fight right now. China unofficially banned a swathe of Australia's commodity exports, including coal, wine and beef, between 2020 and 2023.
($1 = 6.7489 Chinese yuan renminbi)
