BHP(US:BHP) Sou Hu Cai Jing·2025-10-14 19:54Core Viewpoint - The global commodity trade foundation is shifting as BHP agrees to use RMB for iron ore trade with China, breaking decades of USD dominance in this sector [3][9]. Group 1: Market Dynamics - BHP will start using RMB for 30% of its iron ore trade with China from Q4 2025, marking a significant shift in the market [3][9]. - China's iron ore imports are projected to reach a record high of 1.237 billion tons in 2024, reflecting strong demand driven by continuous steel production exceeding 1 billion tons annually [3][5]. - The establishment of the China Mineral Resources Group consolidates purchasing power, representing nearly 40% of China's iron ore imports, enhancing China's bargaining position [5][6]. Group 2: Supply Chain Developments - The Simandou iron ore project in Guinea, with proven reserves of approximately 5 billion tons and an average grade of 66-67%, is set to significantly boost global iron ore supply [3][6]. - The project is expected to produce 12 million tons annually by 2026, contributing to 4.74% of global iron ore production and alleviating supply constraints for Chinese steelmakers [8][15]. Group 3: Financial Implications - The shift to RMB settlement is projected to save Chinese steel companies about $8 per ton in transaction costs, translating to significant financial benefits for large importers [9][11]. - BHP's acceptance of RMB is expected to improve its cash flow and reduce exposure to USD exchange rate fluctuations, enhancing its financial stability [11][12]. Group 4: Global Trade Impact - The transition to RMB for iron ore trade may trigger a broader trend of de-dollarization, as seen with other countries moving away from USD in bilateral trade [12][17]. - The potential decline in iron ore prices is anticipated as supply increases, with forecasts suggesting prices may drop below $80 in the long term [15][17].