China will single-handedly handle all iron ore purchases from 20 steel producers with a public company called China Mineral Resources Group (CMRG). With this decision that will change the game in the market, the public company CMRG is expected to suppress prices. While the pressure on the prices of iron ore, where the supply from Brazil and Australia increased, the decision of China, the world’s largest iron ore consumer, to make all purchases through a single public company, increased the risks in the said market. It is aimed that the public company CMRG will carry out the entire $160 billion worth of Chinese iron ore trade, and 20 Chinese steelmakers will purchase the ore through this company.
China’s move to consolidate purchases for its giant steel industry will give CMRG unprecedented bargaining power in iron ore. This decision is the latest in attempts by China, the number one buyer of every major commodity, to increase its influence on global markets and pricing. While CMRG was established in July 2022, its total registered capital was announced as 4.3 billion dollars.
China’s iron ore imports increase in November
China’s iron ore imports increased by 4.1 percent in November compared to the previous month. According to General Customs Administration data, iron ore imports in November increased to 98.85 million tons from 94.08 million tons in October. In November 2021, the import was 105 million tons. In the January-November period of this year, China’s iron ore imports decreased by 2.1 percent to 1.02 billion tons.
Prices may remain weak in 2023
In the iron ore market, prices have been low for a while due to the oversupply and low demand. While production increases in Australia and Brazil, weakening consumption in China is also seen as another risk factor on prices. Due to increasing production and decreasing demand, the possibility of a weak performance of iron ore prices in 2023 is rising. Raw material flow to Hedland port of Australia, which is seen as the world’s largest bulk export port, reached its highest level in November.