China has formally established a dedicated iron ore company that aims to give Beijing more negotiating power over Australian prices.
The new company, China Mineral Resources Group, has a registered capital of 20 billion yuan ($4.3 billion), according to information from Chinese company registration service Tianyancha.
Tianyancha indicated the company would oversee activities such as mining, ore processing and trading agents.
Perhaps most significantly, China Mineral Resources Group would be tasked with purchasing iron ore on behalf of Chinese steel producers, which is being considered an attempt to gain long-term leverage in its commercial negotiations with Australian exporters.
The company will be headed by outgoing chair of Chinalco, the state metals giant and largest shareholder of Rio Tinto.
BHP chief financial officer David Lamont said the major miner was not concerned about the new company, suggesting it would be focused instead on maintaining its relationships with its Chinese customers.
“Let me say upfront, at the end of the day we believe that markets will sort out where the price needs to be based on supply and demand,” Lamont said at a business forum in Melbourne on Thursday.
“So we’re not worried about that. It’s something that’s been talked about for a period of time.
“Our key focus is the customer relationships that we have on the ground in China, which are very robust and very strong.”
It comes after Rio Tinto recently flagged “considerable” headwinds in China and a “weakening” economic outlook amid the Russia–Ukraine war and tighter monetary policies to curb rising inflation.
Rio said prices for its commodities decreased during the second quarter of 2022, with growing recession fears and a decline in consumer confidence to blame.
“China’s industrial activity troughed in May amid COVID lockdowns,” the company said in its quarterly report. “June recovered but uncertainties remain given the potential for ongoing outbreaks.
“Economic stability is a focus (in China), but headwinds are considerable from restricted labour and goods movement and a slowing external environment.”
BHP generated record iron ore sales in the 2021–22 financial year, selling 284 million tonnes of the commodity (100 per cent basis) across the 12 months.