But now the Chinese government is trying to reorient its relationship with the Australian iron ore it sees as a strategic vulnerability.
A Chinese steel industry expert who asked not to be identified due to the sensitivity of the problem said China’s mineral resource group was set up to restore order in the market.
“There are too many channels and entities for the import of iron ore that have led to a weakening of the bargaining power of individuals. [players] and sometimes accompanied by a rise in prices, ”he said.
“By creating this company, China can centralize a considerable part of entities and channels, reduce disorderly competition in the market and improve bargaining power.”
Fortescue CEO Elizabeth Gaines said the company maintains strong relationships with all of its Chinese stakeholders.
“We will continue to work closely with our customers and other key stakeholders in China to ensure that we continue to optimize our distribution channels to meet the needs of our long-standing customers and the Chinese steel industry,” he said.
Elizabeth Gaines, executive director of Fortescue. Credit: Sanghee Liu
Commonwealth Bank analyst Vivek Dhar said China was especially exposed to international iron ore prices, as its small mines only produce between 15 and 20 percent of the iron ore it consumes.
“Removing market power from people like BHP, Rio Tinto, Vale and Fortescue is not a new idea in China,” he said.
“[But] China’s centralized approach to iron ore purchases is likely to be more successful now than it was two decades ago. This is largely due to the recent consolidation among China’s state-owned steel producers. “
Dhar said the plan to centralize iron ore purchases was consistent with some of China’s other policy initiatives, such as increasing the supply of iron ore nationally and internationally and increasing the use of iron ore. scrap metal. “These measures will also reduce the influence of the world’s largest iron ore exporters,” he said.
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The China Mineral Resources Group will also have control of the negotiations over Simandou, the world’s largest iron ore deposit in Guinea, Africa. The project has been affected by delays, technical difficulties and disagreements between investors, but when completed could pose a threat to Australia and Brazil’s decades of dominance over the iron ore industry.
“The current multidevelopment or competition among Chinese companies has led to insufficient concentration of funds during the development process,” the Chinese steel industry expert said.
Dhar said the Simandou project was “the main overseas project” that could see global iron ore trade increase significantly this decade.