Bloomberg, a U.S. media outlet, recently made an exclamation that caused a stir in the financial circle: "China has never had such a degree of control over iron ore shipping pricing—it's about to take charge!" Some may ask, "It's just iron ore, why so much fuss?" You don't know, this is a battle that China has fought for over 30 years against Western capital and finally won!

Keep in mind that iron ore is the "food" of industry. Without it, building houses, constructing bridges, and manufacturing cars would be pointless. Although we were the largest buyer before, we could only be at the mercy of others. Now, we can finally stand tall and speak up. How difficult was this journey? Let's talk about it today.

You might wonder: why, as the biggest buyer, did we have no say? To understand how powerful we are now, you need to first know how frustrated we were in the past. For decades, global iron ore pricing power was controlled by the West. They set traps for us in various ways, and we could only passively accept them. There were two major "harvesting" phases:

The first wave: 30 years of the "gentlemen's club," where we couldn't even get in the door.

From 1980 to 2009, iron ore pricing wasn't a free market but rather a "private clique" game. The players were fixed: Rio Tinto, BHP Billiton, Vale, and Japanese and European steel giants. They held their own "annual long-term agreement negotiations," like a secret society, announcing the price after they had agreed on it, then notifying the world: "This is the price for this year, buy it or leave it."

We were the largest buyer in the world, yet they didn't include us in the core negotiations. We weren't even given a seat at the main table. As a result, we had to buy at the prices they set, without even the right to negotiate. This lack of pricing power was a clear case of systemic exclusion, bullying us because we were latecomers!

The second wave: Long-term agreements collapsed, and financial capital came to "graze the grass."

After 2009, the old long-term agreement mechanism finally collapsed. We thought we could gain some influence as the largest buyer, but instead, the pricing power was seized by even tougher players—international financial capital.

They turned iron ore into a "futures game," using the Platts index as a standard, trading it in Singapore and Chicago exchanges. Previously, pricing was based on "cost plus profit," which was relatively straightforward; now, it's all about capital speculation, based on "expectations and funds." Our steel plants needed iron ore, which was a necessity, but it became a reason for financial capital to raise prices: "Look, China needs so much, so it must go up!" Then they wildly increased the price, and when we had to buy, they crashed the market to reap the harvest. In this situation, the lack of pricing power was being beaten down by financial rules.

After decades of frustration, we finally stopped being passive and started fighting back with a combination of "top-level design and market force." The core was to build our own system and challenge Western capital:

Step one: Establish our own "price benchmark" to break the information monopoly. Previously, pricing was entirely based on the Platts index, which allowed others to dictate the price. We directly created the "China Iron Ore Price Index," incorporating our domestic real supply and demand situations, providing a "Chinese price." This way, the global market couldn't just listen to the West's single voice anymore. We finally gained the confidence to speak, which was the first step in claiming pricing power—controlling the narrative.

Step two: Unite the scattered forces into a single, concentrated effort. Previously, our steel companies acted independently, buying each other up, giving miners and capital opportunities to exploit. Later, the state established the "China Mineral Resources Group," integrating all steel companies' procurement needs. Previously, we faced multiple opponents and were easily defeated, but now we strike with one punch, having larger procurement volumes and stronger negotiation positions. It's like going from a group of individual stock investors to a major player entering the market—how could the influence be the same?

Step three: Bypass the dollar and play our own "settlement game." This step is the most critical and the toughest! Previously, all global iron ore trade was settled in dollars, meaning our transactions were always on their turf, and they could cut us off anytime. Now, we directly negotiated with giants like BHP Billiton: from now on, we will settle in RMB!

- This isn't just changing the currency, but striking at the root. The dollar is the foundation of international financial capital. By settling in RMB, we are pulling iron ore trade out of the dollar system, shaking its very foundation. This not only reduces the suffering of exchange rate fluctuations but also restructures the rules of global commodity trading!

Why did Bloomberg say we can now take control? The key lies in a mine called "Simoredu." This place is not just any mine—it's the "ultimate move" of our previous combination of strategies, like holding a trump card in our hand:

First, we hold the resources. Simoredu is the world's largest high-quality iron ore mine, previously controlled by Rio Tinto. Now, China Aluminum Group is Rio Tinto's largest shareholder and a joint venture partner of this project, meaning we have deeply controlled this "super mine," completely breaking the supply monopoly of the three major mining companies. Before, they dared to raise prices because we could only buy from them. Now, we have our own top-tier mine, and they will have to think twice before raising prices again.

Second, we've mastered the "entire industrial chain." Simoredu is located in Guinea, Africa. Previously, due to lack of roads and ports, even the best mines couldn't be transported. We directly stepped in, building railways, bridges, and ports, utilizing our expertise in infrastructure to revitalize this "dead mine."

This isn't just about buying a mine; it's about controlling the entire process from mining to transportation, following our standards. This means we have taken control of the entire industrial chain. This "infrastructure for resources" approach is something Western capital lacks both the technology and efficiency to replicate.

Most importantly, we have mastered the "expectation." Simoredu has huge capacity, high grade, and low cost. Its presence is like a "Sword of Damocles" hanging over the global iron ore market. When negotiating with miners in the future, we can say: "If you overcharge, I'll buy more from Simoredu." This changes the market's supply and demand expectations, transforming us from "passive buyers" to "selective buyers."

Conclusion: This is not the end, just the beginning of the door opening

Truly, our initial control over iron ore pricing is not due to luck, but due to 30 years of hard work and planning: establishing our own price index, consolidating procurement strength, breaking through the dollar settlement, and grasping Simoredu as a trump card, creating a crack in the Western capital's barrier.

Bloomberg's exclamation essentially acknowledges that the days when they set the rules are about to change. However, we must be clear that this is just the beginning, and international financial capital will not easily give in. There will still be various forms of confrontation in the future. Regardless, from being "at the mercy of others" to now having a voice, we have finally opened the door to taking control. These 30 years of hardship were not in vain!

Original article: https://www.toutiao.com/article/7569850847266390591/

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