One year after its creation, China Mineral Resources Group (CMRG) has reportedly been in talks with Rio Tinto and other miners.

In July 2022, the state-owned China Mineral Resources Group (CMRG) was established as a central agency for mining activities, iron ore processing, import and export of commodities, and supply management services. One year later, the organisation has reportedly been in talks with Rio Tinto and other miners to discuss China’s iron ore supply for 2024. When it was launched, CMRG's aim was to enhance China's iron ore supply capability and improve its iron ore pricing power. China imports 80% of its iron ore requirements and decarbonization means steelmakers need higher-quality, premium-priced iron ore at the lowest prices possible. Current negotiations are reportedly centred on preferential terms on transport, grades, and delivery arrangements.

For many years, China has been complaining about high iron ore prices, attributing it to a market dominated by a small number of large miners. However, China accounts for about 70-75% of seaborne imports and is the main market price driver.

The annual contract pricing mechanism was abandoned in 2010 and Project Blue believes that there is no chance that the miners would accept a change in the current daily index pricing. It is, therefore, difficult to estimate which advantages China could gain from negotiations. Chinese mills can already set volume and ore types contracts with miners and although decarbonisation could trigger more demand for higher grades, prices for low gangue iron ore, used by steel mills, are primarily set by steel margins, which are a reflection of the Chinese market conditions. Also, Chinese mills usually blend ores, depending on prevailing premia or discounts.

There is, however, a possibility that CMRG could try to take advantage of its size to get bilateral agreements and/or discounts from one specific miner and/or for a specific product. Whether such a strategy would be successful is questionable.

In order to lower its import requirements, China is aiming to increase its domestic iron ore production from an estimated 270Mt to 370Mt in 2025, although domestic ore production costs are usually situated on the highest part of the cost curve, except for captive mines.

The iron ore price has fluctuated between US$105 and US$120/dmt over the past six months, supported by strong Chinese steel production. Although domestic demand remains weak, Chinese steel exports increased 28% year-on-year to 59Mt in the first eight months of the year, mainly because of the weak Yuan. China’s crude steel production could reach its second-highest production level in 2023, close to 1,050Mt. As a result, iron ore consumption is also increasing and Chinese imports will exceed last year’s level of 1,110Mt. Although CMRG appears in a strong position to discuss terms with large mining companies, China’s continued reliance on seaborne imports will serve as a check on the company's influence.