China steel group urges domestic pricing in iron ore contracts

China’s top steel industry group has urged the state-backed iron ore trader, China Mineral Resources Group Co., to push for using domestic price benchmarks in supply talks with major miners including BHP Group and Rio Tinto Group.

A newly launched port-side spot price index should become a core pricing reference for the market, the China Iron and Steel Association said in a statement on its website on Saturday. It added CMRG should seek to use the gauge in long-term contract negotiations with major mining firms.

The statement, based on comments made by CISA vice chairman Luo Tiejun at an industry conference on Dec. 18, underscore a continued effort to shift pricing power back toward China. The country consumes most of the world’s seaborne iron ore, but has complained that prices are still largely set using US-dollar benchmarks influenced by overseas futures markets.

CMRG, which was set up in 2022 to give China more bargaining power with big miners, has taken a more assertive approach this year, including restricting purchases of certain products from BHP after long-term contract talks stalled. It is now negotiating supply deals with other miners for next year, aiming to secure more favorable terms for steel mills.

Luo also flagged that spot trading — the buying and selling of iron ore for immediate delivery — has highlighted tensions in the market, noting there have been periods when long-term contract prices ended up higher than spot prices. He said spot prices remain essential as they reflect real supply and demand but should serve mainly as a reference for long-term contracts.

(By Katharine Gemmell)