Beijing works to give Chinese steel producers more leverage over Australian iron

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China’s government has formally established a new minerals giant that aims to give Chinese steel producers more bargaining power over prices for Australia’s most important export iron ore.

The move, first touted by the steel industry earlier this year, comes as speculation mounts that Beijing will soon back down on its unofficial ban on Australia’s coal exports, which could reopen trade worth almost $14 billion a year at its peak.

The ban on coal was imposed in 2020 as Beijing stepped up pressure in a diplomatic dispute, but China’s heavy reliance on Australia for iron ore — the key ingredient in steelmaking — meant those exports remained unaffected.

And last year as prices spiked, Chinese steel producers paid more than $130 billion — a record — to Australian miners, entrenching iron ore as Australia’s most lucrative export by a wide margin.

Prices have since slumped, but customer concerns they could rise again appears to be driving the formation of what some commentators dub a new Chinese iron ore cartel.

Chinese state media outlets this week reported the registration of the China Mineral Resources Group, headed by a management team of heavyweights from the country’s steel and aluminium sector.

Chinese national flags are flying near a steel factory in Wu'an, Hebei province, China,
Chinese steel manufacturers are currently heavily reliant on Australian iron ore.(Reuters: Thomas Peter)

While the new body has a wide remit, its role in purchasing iron ore from abroad on behalf of Chinese steel producers is being seen as an attempt by the industry to gain long-term leverage in price negotiations with Australian exporters.

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