BHP(US:BHP) Sou Hu Cai Jing·2025-10-08 13:56Core Viewpoint - The global commodity market reacted sharply to a notice from China Mineral Resources Group, which announced a halt on purchasing iron ore from BHP in USD, leading to a significant drop in BHP's stock price. This move signifies China's transition from being a passive buyer to a rule-maker in resource trade [1] Group 1: Market Dynamics - For decades, the iron ore market has been dominated by BHP, Rio Tinto, and Vale, leaving buyers, particularly China, constrained in their purchasing power [3] - The establishment of China Mineral Resources Group in 2022 centralized procurement for domestic steel mills, shifting from a fragmented purchasing approach to unified negotiations [3] Group 2: Import Trends - By the first eight months of 2025, China's imports of iron ore from Australia decreased by 12%, indicating a significant diversification in iron ore sourcing [4] - China consumes approximately 75% of the global seaborne iron ore, importing around 1.2 billion tons in 2023, with about 700 million tons from Australia, accounting for approximately 63% [6] Group 3: Pricing and Currency Issues - The immediate cause for halting purchases from BHP was a pricing disagreement, with BHP insisting on a 15% increase for 2025, leading to a price difference of about $30 per ton compared to current spot prices [7] - China has made it clear that future transactions must be settled in RMB, challenging the dominance of the USD in commodity pricing [8] Group 4: Supply Network Development - China's strong stance in iron ore trade is supported by a diversified supply network, including significant projects in Guinea and increased imports from Brazil and Russia [9][10] - The domestic recycling of scrap steel is also maturing, with projections indicating that by 2025, electric arc furnace steelmaking will account for 25% of production, reducing the demand for primary iron ore by approximately 40 million tons annually [11] Group 5: Rise of RMB Settlement - The push for RMB settlement in iron ore trade represents a challenge to USD hegemony, with increasing cross-border transactions in RMB [12] - In 2024, Hebei Steel Group procured 3.06 million tons of iron ore through RMB settlement, marking a 25% increase year-on-year [13] - The proportion of metal trade using RMB for settlement rose to 9.2% in Q3 2023, a significant increase from 2.1% in 2020 [14] Group 6: Global Trade Order Changes - The implications of this iron ore trade dispute extend beyond China and Australia, with Brazil and Russia also adapting to RMB settlement, thereby increasing their market share [15][16] - Southeast Asian steel mills are beginning to inquire about RMB usage, raising concerns about potential shifts in settlement methods for other commodities like copper and aluminum [18] - The global resource landscape is being reshaped, with Australia potentially losing market share to more cooperative suppliers like Brazil and Guinea if it remains inflexible [19]