Big Four Major Iron Ore Producers Begin Work in Chinese Ports

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Australia and Brazil are considered to be the largest exporters of iron ore. Each country holds about one-third of the total global exports, of which most go to China, the world’s largest consumer. Recently, the four major players in the iron ore industry have signed contracts with China.

China is the third largest producer of iron ore globally. Nevertheless, despite being so, the country still needs to import around 80 per cent of the iron ore it feeds its steel industry. China attracted the top-producing iron ore mines to work with them through yuan settlement. This gave the country direct access to the iron ore it needed.

According to an industry insider at Shandong Port Group, “An Australian mining firm started yuan-based spot trade of iron ore last year, and we signed contracts directly with the company this year on such business. That also means that all ‘global four iron ore mines’ (Brazil’s Vale, Australia’s BHP, FMG, and Rio Tinto) have begun using yuan as a settlement currency for spot trade in Chinese ports.”

This is a massive step for the largest importer of iron ore, as it will allow China to strengthen its pricing power in the global market. Right now, Australia supplies about 60 per cent of China’s total iron ore, while Brazil is at 30 per cent. All big four iron ore producers are now doing business directly at China’s major iron ore trading post, Rizhao port.

According to Zhang Yukun, a writer at Caixin Global, “China’s yuan is increasingly becoming a go-to currency for international settlements, with 42.1 trillion yuan ($6.1 trillion) worth of the country’s cross-border payments and receipts using the redback in 2022, up 15 per cent from the previous year and marking the fifth straight annual increase.”

In a meeting with Gulf Nations last December 2022, Chinese President Xi Jinping announced that the country is willing to work with other countries in utilising yuan for settlements of oil and gas trades, apart from iron ore.

Yukun also reported that Beijing is working to increase the yuan’s international usage to rival the USD. Many countries in Southeast Asia, as well as Russia, have been increasingly using the yuan to settle imports and exports.

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