China and Australia's Iron Ore Battle Has Been Reignited?

Is the Dispute Over Iron Ore Between China and Australia Rekindled?

According to Observer Net, citing Bloomberg, the China Mineral Resources Group has asked domestic buyers to suspend purchasing iron ore from BHP, an Australian producer priced in US dollars.

The fundamental reason for our suspension of purchasing iron ore from Australia is that there is no consensus on the price between China and Australia. A well-known person stated that both sides have had multiple rounds of negotiations on the price issue, but no results have been achieved.

Today, Australian Prime Minister Albanese became anxious, saying: "The Chinese suspension of procurement of BHP iron ore is disappointing, and hopes this issue can be resolved quickly."

Has the Australian Prime Minister Become Anxious?

Why does the Australian government get anxious when China stops buying iron ore from Australia? What is the so-called "entanglement" between China and Australia over iron ore? Can China win this battle over iron ore this time?

Today, we will study these issues. It is not easy to write, please like, share, and save.

The Iron Ore Battle Between China and Australia Has Begun!

From an international relations perspective, since Albanese took office, his relationship with China has always been good, and his stance on China is much better than that of the previous prime minister, Mossen, so Sino-Australian relations have been good in recent years.

Because the quality of Australian iron ore is good, its price is low, and China has long purchased iron ore from Australia, and the trade in iron ore between China and Australia has always been a mutually beneficial relationship.

Australian Iron Ore Is of High Quality and Low Price

So what made China so angry that it even refused to buy Australian iron ore? The real reason is the price. In Australia, BHP is a well-known iron ore mining company, and China has also bought a lot of BHP's iron ore.

However, in the 2025 fiscal year, due to economic fluctuations, the international iron ore prices continued to decline, and the average transaction price of BHP's iron ore fell by 19%, leading to a 24% drop in BHP's iron ore profits.

It is normal for demand to decrease and prices to fall, so China and Australia conducted price negotiations. Although the content of the negotiations is commercial secrets, we do not know about them, but obviously, China and Australia have "broken down" on the price of iron ore.

If the talks broke down, then we need to take measures.

Compared to the last time Australia directly raised the price of iron ore, China has taken the initiative this time. China's request is simple: do not purchase BHP iron ore priced in US dollars, and if you want to buy, it is okay to use RMB pricing.

China Suspends Purchases of BHP Iron Ore

Evidently, China is trying to force Australia to conduct trade with China using RMB. This is in line with China's trade and financial interests. And the reason for taking such action is also related to the price. Using RMB for purchases ensures more stability in China's pricing power, while using USD pricing means the international market dictates the price.

This is not the first time China has pressured Australia.

In early September this year, the China Mineral Resources Group required domestic steel mills to stop purchasing BHP's Kimbula fines, so the second round of the iron ore battle between China and Australia actually began at the beginning of September.

The Struggle for Pricing Power in China-Australia Iron Ore

What is China's card? China is the world's largest importer of iron ore, and our demand accounts for 75% of global seaborne iron ore.

Australia's card is its rich and high-quality iron ore. The BHP, which has been suspended from purchase, is one of Australia's three major iron ore suppliers.

Australia Has 34% of the World's Iron Ore

Both sides have the confidence and leverage to challenge each other, which is why the iron ore price cannot be determined. Even the Australian Prime Minister said, "Sometimes, when people negotiate prices, these things happen. But I hope to see this issue resolved quickly."

In the past, China was often at a disadvantage in price disputes. Because several years ago, many steel plants were in China, and they did not form a price alliance. If some domestic factories made concessions, it was easy for the Australian producers to manipulate the import price.

However, three years ago, China established the China Mineral Resources Group, which unified the purchase of iron ore. It formed a price alliance internally and used the identity of a single buyer for imports externally. This made it difficult for Australian producers to manipulate Chinese steel companies.

The Establishment of the China Mineral Resources Group

So, although the current dispute between China and Australia is fierce, in the past, we didn't have the confidence to fight. Now, the fiercer the dispute between China and Australia, the more it is a "warning" to Australia.

We hope that Australian companies understand that the current China is different from three years ago. We are no longer in an era where iron ore can be arbitrarily inflated. If you don't sell, I will choose to buy from other places.

Of course, this does not mean that China wants Australia to completely submit. For example, this time, we only suspended the purchase of BHP iron ore, not a direct announcement to suspend the purchase of all Australian iron ore.

This means that BHP is clearly "cheating" on the iron ore price. However, we have not taken sanctions or targeted measures against the other two major iron ore mining companies in Australia. Therefore, it is clear that the other two iron ore companies have reached an agreement with China on the price.

The Foreign Ministry also stated, "China has always believed that economic and trade cooperation is the ballast stone of Sino-Australian relations. China is willing to work with Australia to provide a fair, open, and non-discriminatory business environment for enterprises of both countries to invest and operate in each other's countries, and promote the continuous development of Sino-Australian economic and trade cooperation."

Evidently, China is not trying to fight a life-or-death battle with Australia over iron ore prices. The reason for sanctioning BHP is simply to ensure the "fairness" of iron ore prices and trade.

-----------------------------------------

[Sakura Finance] Explore the truth behind the hot topics, welcome likes, comments, and tips.

Original article: https://www.toutiao.com/article/7556202273136509455/

Statement: This article represents the personal views of the author. Please express your attitude by clicking the [Top/Down] button below.