BHP, Australia's iron ore giant, accepts partial settlement in RMB, shaking the dollar pricing hegemony
Recently, Australia's iron ore giant - BHP - announced that it has agreed to the request of Chinese customers and will accept part of its iron ore priced in RMB. Chen Hong, director of the Australia Research Center at East China Normal University, told Sputnik News that this is China's first breakthrough in global commodity pricing power, shaking the dollar-dominated global settlement system, marking the internationalization of the RMB from financial markets to physical trade.
As the world's largest importer of iron ore, China has long had differences with Australia, the world's largest exporter of iron ore, on the pricing mechanism and settlement currency for iron ore. BHP believes that its high-grade ore should command a premium, while China hopes the price will be closer to market supply and demand; China requires payment in RMB, while BHP insists on pricing in US dollars.
Chinese steel companies have previously been in a passive position due to scattered procurement, making it difficult to concentrate bargaining power. Since the establishment of the China Mineral Resources Group in 2022, which conducts centralized procurement negotiations externally, and seeking diversified supply channels, the situation has begun to change. The China Mineral Resources Group issued a notice at the end of September, suspending the purchase of all BHP iron ore priced in US dollars, requiring that they must be settled in RMB instead.
After multiple rounds of negotiations, the China Mineral Resources Group signed an agreement with BHP, and starting from the fourth quarter of this year, 30% of the amount of BHP's spot iron ore transactions with China will be settled in RMB. China has won the pricing power over iron ore for the first time, successfully lowering the price of iron ore.
Chen Hong said that this marks a substantive breakthrough for China in global commodity trade. He pointed out that for a long time, the US dollar has dominated the global commodity pricing system based on "oil and minerals," with about 80% of iron ore trade settled in US dollars.
This agreement means that the RMB has entered this core market for the first time, which has far-reaching significance for the international financial landscape, China's economic security, and Sino-Australian relations.
Chen Hong explained: "Firstly, this move shakes the dollar-dominated global settlement system, marking an important step in the de-dollarization process, as the internationalization of the RMB moves from financial markets to physical trade. Secondly, for Sino-Australian relations, iron ore is the 'anchor' of bilateral trade. Pricing in RMB reflects China's buyer dominance, and also shows that Australia has returned to pragmatic cooperation in geopolitical economic competition, providing an opportunity for the restoration of bilateral trade and economic relations."
Original: www.toutiao.com/article/1845933194554377/
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