Australian mining major BHP Billiton has agreed with China's state-owned iron ore trading arm China Mineral Resources Group, along with Chinese steel producers and traders, to switch to Chinese currency (renminbi) pricing for 30 percent of its spot iron ore trade with China. including prices based on CFR at Chinese ports. According to market sources and Chinese media, the agreement will take effect from the fourth quarter of 2025.
As SteelOrbis previously reported, at the end of September, Chinese buyers suspended iron ore trading with BHP in US dollars and were negotiating long-term contracts to increase buyer power in the dominated iron ore market. large foreign mining companies. After negotiations, BHP eventually compromised and agreed to settle in RMB.
Cross-border settlement in Chinese currency can reduce foreign exchange risks, reduce financing costs and increase purchasing initiative for Chinese steel companies. Meanwhile, RMB settlements can increase the share of RMB use in commodity trading and promote its internationalization process. RMB settlement could weaken the US dollar's monopoly on the iron ore trade and help diversify trade, market sources told SteelOrbis.
Meanwhile, BHP has decided to set an observation period for the long-term contract to 2026, which will remain in US dollars for now, and if market acceptance of the index China's RMB iron ore will meet the standard, negotiations on the RMB-based long-term agreement price will be introduced.
Using the yuan for settlement not only means changing the currency, but also requires the integration of domestic bank loans, cross-border payment systems and exchange rate hedging to form a closed loop for the entire process.
For the four largest mining enterprises - Rio Tinto, Vale, BHP Billiton and Fortescue account for 70 percent of China's iron ore supply, with BHP totaling 295 million tonnes in 2024.
As for the spot market reaction, sources interviewed by SteelOrbis agree that it is will give more capacity to Chinese mills during negotiations and could help improve their profitability in the coming months, which narrowed in September due to high iron ore prices and no apparent improvement in steel demand. However, after the holiday, iron ore prices, as expected, rose slightly on the first working day, October 9.
