BHP(US:BHP) Sou Hu Cai Jing·2025-10-28 09:11Core Viewpoint - The article discusses a significant shift in the iron ore negotiation dynamics between China and Australia, highlighting China's strategic moves to leverage its position as the largest steel producer and buyer of iron ore, ultimately leading to a successful negotiation with BHP for pricing in RMB instead of USD [2][15]. Group 1: Historical Context - For 20 years, China has been at a disadvantage in iron ore pricing, paying significantly higher prices compared to the production costs of Australian mines, which are around $19 per ton, while China was paying up to $109 per ton [4][5]. - In 2024, the average profit margin for Chinese steel companies was only 0.71%, with many companies facing losses, contrasting sharply with the high profits earned by Australian miners [6][7]. Group 2: Strategic Moves by China - China established the China Mineral Resources Group in 2022, consolidating purchasing power and representing nearly 40% of the country's iron ore imports, allowing for more effective negotiations with suppliers [10]. - China has secured contracts with Brazilian mining giant Vale and other Australian companies for RMB-denominated transactions, reducing reliance on USD [11]. - The development of the Simandou iron ore project in Guinea, which has higher quality ore than Australian sources, positions China to further reduce dependence on Australian iron ore [12]. Group 3: Negotiation Outcomes - The negotiation in October 2025 resulted in a shift to 30% of transactions being settled in RMB, marking a significant change in the pricing structure and reducing the influence of the Platts index, which has been criticized for benefiting Western interests [14][15]. - The article emphasizes that this negotiation is not just about immediate price savings but represents a broader challenge to the dominance of the USD in global commodity trading [15][17]. Group 4: Future Implications - With the upcoming availability of Simandou iron ore and the increasing recycling of steel, China's position in the global steel market is expected to strengthen, allowing for more flexibility in sourcing and pricing [17]. - The article concludes that this shift marks a turning point in the relationship between China and Australia, with China now able to dictate terms rather than being at the mercy of Australian suppliers [17].