An unconfirmed blockade on key iron ore shipments has wiped more than $5 billion from mining giant BHP’s value, but experts say tough talk from China’s steelmakers was apolitical and nothing new.
Beijing’s state iron ore buyer has told steelmakers to pause imports of BHP ore, amid hardball negotiations over the price of the crucial resource, Bloomberg reported on Tuesday.
The news prompted a 2.5 per cent sell-off in BHP shares, wiping more than $5 billion from the world’s biggest miner’s $216 billion market cap.
The federal opposition has called for the Commonwealth to step in to support BHP and Australian iron ore producers.
“We need a prime minister who stands up for Australia when it comes to these negotiations,” defence spokesman Angus Taylor told Sky News.
“It’s going back to the bad old days of 10 or 15 years ago when this was happening. They’re trying it again.”
However, tough negotiations between China’s steelmakers and iron ore suppliers were quite common, according to the president of University of Technology Sydney’s Australia-China Relations Institute.
“Chinese steelmakers have tried to do this before, but they’ve failed for a very simple reason: China relies on Australian iron ore supply as much as Australian iron ore suppliers rely on China as a market.” Professor James Laurenceson told AAP.
“It’s not as though they have all the leverage.”
Prof Laurenceson said any stand-off was purely price-related and not a repeat of politically charged trade tensions of the early 2020s.
“I’ve got no sense from speaking to Chinese diplomats that they would be rushing to disrupt trade again over political differences,” he said.
Treasurer Jim Chalmers said the reports were concerning but ultimately a matter for BHP to work through.
“I’ll have discussions with (BHP chief executive) Mike Henry about that in due course, when we can set that up,” he told reporters in Brisbane on Wednesday.
Prime Minister Anthony Albanese said the measure was “disappointing.”
“Let’s hope, certainly, that they are very much short-term,” he said.
There is confusion over exactly what has happened, with sources telling AAP the mining giant was continuing to ship iron ore to China.
Chinese commodities analyst Mysteel also suggested no order was given to stop BHP shipments.
The minerals company said it wouldn’t comment on commercial arrangements.
Australia is the world’s largest exporter of iron ore, and China is the top consumer.
In 2022, it established China Mineral Resources Group (CMRG) to buy iron ore for steelmakers, so it could purchase in larger bulk at lower prices.
As China’s industrialisation phase slowed down, the supply and demand equation for iron ore was changing, AMP chief economist Shane Oliver said.
“So demand is not as assured as it once was, and China is also developing supply from other countries,” Dr Oliver told AAP.
“Whichever way you cut it, it could have significant impacts, because it’s our biggest import.”
Analysts believe CMRG is trying to get a better deal on BHP’s medium-grade ore, and argue the potential pause on imports is not a return to the sweeping trade bans introduced on Australian exports in 2020.
BHP is one of China’s largest iron ore suppliers alongside Rio Tinto and Brazilian mining giant Vale.
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