China’s giant iron ore trader expands clout selling Vale cargoes

China’s state-run iron ore trader is now selling cargoes for Brazilian miner Vale SA, in a sign of some softening toward the group as it becomes embedded in the Asian country’s $130 billion import market.

China Mineral Resources Group Co. is currently offering Vale’s iron ore on the spot market, and has been selling the miner’s product from at least mid-August, according to documents seen by Bloomberg and people with knowledge of the matter. It’s the first time CMRG has sold Vale’s cargoes, they added.

The giant trader was set up three years ago in an effort to tilt the balance of power from major iron ore producers such as Rio Tinto Group and BHP Group to China’s vast steel industry. Vale had previously eschewed CMRG as the Brazilian miner looked to focus on longer-term contracts directly with the nation’s steelmakers, Bloomberg reported in June.

However, with Vale’s strong production contributing to an already well-supplied market, and with CMRG mainly engaged in Australian cargoes, the Chinese trader has now stepped in to handle Brazilian supplies, said people familiar with the matter who asked not to be identified because the deals are private.

A spokesperson for Vale declined to comment. CMRG couldn’t immediately comment on the matter.

The move highlights how changing market dynamics are reshaping commercial strategies on both sides. For Vale, moving cargoes through CMRG offers some flexibility in the world’s biggest steel producer, while helping it manage high output. For Beijing, the deal strengthens its role as a price-setter and stabilizer in a trade that has long been dictated by global miners.

Iron ore can be transacted via the spot market for individual, up-front cargoes, or by longer-term contracts linked to daily reference prices. CMRG has been in talks with the top miners for long-term supply starting in the second half, but little progress has been made so far, the people said.

Long-term contracts often leave steelmakers with mismatched volumes relative to actual output, creating a need to offload any surplus or purchase additional cargoes to cover shortfalls. CMRG also doesn’t resell iron ore at a premium, meaning the mills view the trader as a relatively fair supplier.

For the miners, long-term contracts offer price stability and easier operation planning.

(By Katharine Gemmell and Alfred Cang)