This article first appeared on GuruFocus.
China’s state-backed iron ore buyer has thrown a curveball at global commodity markets, telling domestic mills and traders to halt purchases of new BHP Group (NYSE:BHP) cargoes. The order, which includes shipments already leaving Australia, effectively freezes dollar-denominated deals and leaves only yuan-priced supplies already landed in China available for trade. The move follows days of negotiations that failed to break a pricing deadlock, escalating a dispute that goes to the heart of Beijing’s efforts to reshape its relationship with the world’s largest miners.
Analysts note the timing may not be accidental. With China’s steel demand softening and vast new tonnage from Guinea’s Simandou project expected, Beijing appears more confident in testing its leverage over suppliers such as BHP, Rio Tinto (NYSE:RIO), and Vale (NYSE:VALE). Earlier restrictions on BHP’s Jimblebar blend fines have already been tightened, with mills instructed not to take delivery even at Chinese ports. Some producers have begun reconfiguring their inputs, highlighting how the standoff is reshaping operational decisions inside the industry.
Markets were quick to price in the uncertainty. Singapore iron ore futures climbed 1.8% to $105.05 a ton, while BHP shares fell as much as 4.8% in London, marking their sharpest drop since April. China Mineral Resources Group has so far stayed silent, and BHP has declined to comment on commercial arrangements. For investors, the episode underscores how China’s evolving commodity strategy could become a defining factor in the iron ore trade, potentially redrawing the balance of power between the world’s top consumer and its key suppliers.
