BHP(US:BHP) Sou Hu Cai Jing·2025-10-13 11:18Core Viewpoint - The Chinese Mineral Resources Group (CMRG) has halted all dollar-denominated iron ore purchases from BHP, signaling a significant shift in China's bargaining power in the global iron ore market [1][10]. Group 1: Market Dynamics - CMRG's decision to stop purchasing from BHP indicates a departure from past practices where Chinese steel mills had little negotiating power against international mining giants [3][5]. - Historically, Chinese steel mills faced rising iron ore prices with minimal profit margins, as evidenced by the steel industry's profit of only 50 billion RMB in the first half of 2025 compared to BHP's net profit of 10.2 billion USD during the same period [3][5]. Group 2: Changes in Demand and Supply - The demand for steel in China is shifting due to a transition in development models, with crude steel production decreasing by 2.8% from January to August this year, allowing for more negotiation space [5][8]. - CMRG's establishment in 2022 has unified the purchasing power of various steel mills, enhancing their negotiating position against suppliers like BHP [7][8]. Group 3: Strategic Positioning - CMRG's actions reflect a strategic move to diversify supply sources, particularly with the development of the Simandou iron ore project in Guinea, which is expected to produce 120 million tons of high-quality iron ore annually [8][10]. - This diversification strategy aims to reduce reliance on Australian iron ore and compel BHP to offer fair pricing, indicating a shift from being a passive price taker to an active participant in shaping international trade rules [10][12]. Group 4: Implications for the Industry - The halt in purchases is not a political statement but a calculated business strategy to leverage China's market size for better pricing [10][12]. - Lower upstream raw material prices are expected to benefit downstream industries, including automotive and home appliances, by controlling production costs [12].