Core Insights - The shift from USD to RMB for iron ore transactions signifies a broader change in pricing power and settlement mechanisms in the global commodities market, particularly affecting the steel, construction, and manufacturing sectors [1][5][12] Pricing Power and Market Dynamics - Historically, iron ore has been priced in USD, with oligopolistic supply leading to a buyer's disadvantage; however, concentrated purchasing power is shifting the negotiation dynamics [3][9] - The profit margins for the Chinese steel industry are under pressure, with projected profit margins below 1% in 2024, highlighting the impact of pricing power on industry profitability [3] Currency Transition and Trade Finance - The transition to RMB settlement is expected to alter the entire trade finance ecosystem, including trade credit and hedging instruments, thereby reducing the influence of USD fluctuations on raw material costs [5][7] - The acceptance of RMB for spot transactions indicates a significant shift in supply-demand expectations, as suppliers recognize the risk of being replaced [5][9] Supply Chain and Inventory Management - The stability of raw material pricing will allow steel mills to reset inventory strategies and improve cash flow forecasting, leading to gradual cost improvements rather than abrupt price drops [7][8] - The global supply structure is adjusting, with high-grade iron ore from regions like Simandou gaining value, which may alter the pricing dynamics and reduce the sharpness of price peaks [8][10] Historical Context and Future Outlook - The historical context of China's steel demand and pricing dynamics illustrates the evolution of market power, with past experiences shaping current negotiation strategies [9][10] - The move towards multi-currency transactions in commodities is not a complete replacement of USD but rather a parallel system, with iron ore being a key indicator of this transition due to its high demand and clear alternative supply paths [12]