BHP(US:BHP) Sou Hu Cai Jing·2025-10-12 04:13Core Insights - BHP and China Mineral Resources Group have reached an agreement to settle iron ore transactions in RMB starting Q4 2025, marking a significant shift in pricing power in the global iron ore market [1][4] - This agreement is a crucial step towards the internationalization of the RMB, particularly in commodity trading [1][6] Group 1: Market Dynamics - China accounts for approximately 75% of global iron ore demand, while 82% of Australia's iron ore exports are directed to China, which constitutes about 5% of Australia's GDP [3] - Historically, iron ore pricing has been dominated by sellers, with transactions conducted in USD, leading to higher costs for Chinese buyers [3][6] - BHP's production cost for iron ore is reported at $19 per ton, yet long-term contract prices were set at $109.5 per ton, highlighting the disparity in pricing [3] Group 2: Strategic Changes - The establishment of China Mineral Resources Group has consolidated major domestic steel and mineral companies, enhancing China's bargaining power in negotiations with global miners [3][4] - The Chinese government has implemented a ban on purchasing BHP iron ore priced in USD, marking a significant policy shift [4][6] Group 3: Implications for Future Transactions - The acceptance of RMB for iron ore transactions eliminates the need for currency conversion, reducing exchange rate risks and simplifying the transaction process [6][7] - This move not only lowers costs for Chinese steel companies but also signals a shift in China's role from a passive buyer to an active player in global pricing [6][7] - The decision is expected to enhance the RMB's status in the global financial system and reduce reliance on the USD [7]