Japan and other major iron ore buyers risk becoming price takers as China's state-backed purchasing company seeks greater influence over how the steelmaking ingredient is priced, according to consultant Wood Mackenzie Ltd.
China Mineral Resources Group Co. is shifting from a centralized buying role to a potential force in global price formation, Wood Mac said in a report on Thursday. As a result, costs for Japan and other buyers could become more sensitive to Chinese port inventories, yuan conditions, market sentiment and the rhythm of CMRG's purchases, according to the consultancy.
CMRG has rapidly expanded its influence since it was established in 2022 to consolidate purchases by Chinese steelmakers and strengthen their bargaining power with global miners. Over the past year, it has taken a more assertive approach in negotiations with suppliers, including months-long standoffs with BHP Group and Fortescue Ltd. that restricted sales of some of their products.
CMRG now aims to influence price discovery by obtaining greater visibility on mill restocking, cargo rerouting and order flows. These insights have traditionally been closely held by miners and international trading houses, Wood Mac said. "It plans to do this by capturing transaction data, steering liquidity, and shaping benchmark references through a state-backed platform," the consultancy said.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing