Beijing’s long-planned initiative to wrestle back control of pricing of dry bulk commodities, principally iron ore, has finally taken shape.
Bloomberg is reporting that China Mineral Resources Group was officially launched today. The state-run conglomerate has a registered capital of RMB20bn ($3bn) and a business scope which covers activities including mining, ore processing and trading. The group will manage mines as well as serve as a unified iron ore buying platform for steel mills in China.
Yao Lin, former chairman of Aluminum Corp of China, and Guo Bin, executive vice president of China Baowu Steel Group, will lead the new group, according to Bloomberg.
Beijing has long sought to wrestle back some pricing power from the big miners such as BHP, Rio Tinto and Vale with this buyers group having been discussed for more than a decade.
The new company will also look after overseas mining projects such as the giant Simandou iron ore project in Guinea.
China is by some distance the world’s largest iron ore buyer, taking more than 1bn tonnes a year, accounting for around 70% of global production. For the last 10 years major steel-producing nations have shifted from annual contract negotiations to an index-price mechanism. Prices for iron ore have been highly volatile during the pandemic.
While China pulled back from all manner of Australian goods over a spat over the origins of covid two years ago with bans in place for seafood, wine and coal, it has been harder to shun iron ore. However, China is backing new sources of the commodity, most notably funding the Simandou mine in West Africa.