BHP not concerned about China’s plan to centralize iron ore buying

South Flank is part of the Western Australia Iron Ore complex, pictured here. (Image courtesy of BHP).

BHP Group is not worried about a plan by Chinese companies to centralize iron-ore buying, and will focus instead on maintaining good ties with Chinese customers, CFO David Lamont said on Thursday.

Media have said several Chinese state-owned iron-ore buyers are forming a new enterprise to boost their bargaining power in procuring materials.

Asked if the plan to set up a central iron-ore buying enterprise was likely to succeed, Lamont said, “History would say no.”

BHP, the world’s third largest producer of iron-ore, sells the bulk of its output to China. The company led efforts more than a decade ago to end annual iron ore price-setting talks in a shift to market-based pricing.

“Let me say upfront, at the end of the day we believe that markets will sort out where the price needs to be based on supply and demand,” Lamont said at a business forum in Melbourne.

“So we’re not worried about that. It’s something that’s been talked about for a period of time,” he said, referring to the plan to centralize purchases.

“Our key focus is the customer relationships that we have on the ground in China, which are very robust and very strong.”

(By Sonali Paul; Editing by Clarence Fernandez)

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