China suspends iron ore purchases from Australia, BHP raises prices by 15% aggressively, causing a big problem!
Recently, Chinese iron ore purchasing parties suddenly suspended orders from BHP of Australia. What is the reason behind this? Because BHP insisted on increasing prices for Chinese steel companies by 15% and forced them to settle in US dollars.
First, let's talk about how harsh BHP's price increase is. The current spot price of global iron ore is around $80 per ton, but they want Chinese steel companies to sign long-term contracts at a price of $109.5 per ton. This means an additional $30 per ton!
This is no small amount — Chinese steel companies would have to spend an extra $20 billion annually. Imagine, the average profit margin of China's steel industry is only 0.7%, and it has always been a thin-profit, high-volume business. Now, with such a sudden surge in costs, how can the enterprises survive? For example, Chongqing Iron and Steel lost 3.2 billion yuan last year. If this price hike is added on top of that, it would be like adding snow to an already heavy burden.
Regarding the settlement method, BHP insisted on using US dollars for settlement, which clearly increases exchange rate risk. However, the Chinese mineral group didn't sit idle — they directly switched to RMB settlement, and Brazilian and Russian mineral merchants have already cooperated.
This is not just talk: Russia's iron ore exports to China have risen from previous lows to 8% now. A large iron mine in Guinea is about to start production, and the first shipment will be sent next month. Freight costs have also dropped, and the transportation costs of Russian minerals are much lower than those of Australian ones, which makes Chinese steel companies more confident in negotiations.
Looking back at Australia's position in iron ore, it used to account for 60% of China's imports. But now? 86% of BHP's iron ore depends on the Chinese market, but its share has dropped to 18%. Why? Because China is accelerating diversification.
Russia's share is increasing, and once the new mine in Guinea starts production, supply will become more stable. Chinese steel companies are now negotiating together and are not afraid of being cut off — Russian mineral freight costs have dropped, and new mines are about to ship, making the supply chain increasingly flexible.
More importantly, there is the issue of pricing power. The trading volume of iron ore futures in Singapore is only one twentieth of that in Shanghai, which indicates what? China is gradually taking control of the pricing power.
The trading volume in the Shanghai Futures Market has surged, and the global iron ore prices are increasingly dependent on China's stance. By causing this commotion, BHP has actually accelerated China's "de-Australia" process. BHP has definitely made a big mess here.
Original: www.toutiao.com/article/1845292789954572/
Statement: This article represents the views of the author himself.