China’s state iron ore buyer summons traders on BHP restrictions

China’s state-backed iron ore buyer has summoned traders and urged them to refrain from buying new BHP Group cargoes to sell to buyers in the country after they were found to be flouting a restriction on the purchases.

China Mineral Resources Group Co. has signaled it will toughen enforcement in conversations with domestic and foreign traders in recent weeks, according to two people familiar with the matter. The group doesn’t have formal authority over Chinese steel mills that are taking the iron ore, but the order is effectively binding due to the body’s political clout.

CMRG and BHP have been caught in a months-long standoff in talks for long-term contracts on behalf of China’s mills. The state-backed buyer first ordered steel producers to stop buying Jimblebar blend fines, a type of iron ore, in September. It subsequently restricted purchases of all new products, which are denominated in dollars, from the company and then Jinbao, another variety of the steelmaking ingredient.

While CMRG is not considering a sweeping ban on other products, such as Mining Area C fines and Newman lumps, the renewed warning on dollar-denominated purchases could create fresh challenges for BHP when it seeks to market shipments for April, the people said, asking not to be named discussing private matters.

A spokesperson for BHP declined to comment on commercial matters. CMRG didn’t immediately respond to a request for comment.

Currently, steel mills are able to take Mining Area C fines and Newman lumps if the sales are via term contracts or CMRG. However, there’s a complete ban on Jimblebar fines and Jinbao. Inventories have been growing at Chinese ports since the curbs took effect, while some cargoes are being diverted to other markets.

(By Katharine Gemmell and Alfred Cang)