China's state-controlled iron ore procurement arm has widened restrictions affecting new seaborne cargoes from BHP as a prolonged contract dispute continues, people with direct knowledge of the situation said.
Several traders were told this week by China Mineral Resources Group - known as CMRG - to scale back purchases of BHP's core seaborne products, including Mac fines, Newman fines and Newman lumps, according to two sources who spoke on condition of anonymity because of the sensitivity of the matter. Those products had not previously been included in the rounds of curbs rolled out in September and November.
BHP declined to comment. CMRG did not immediately reply to an emailed request for comment, the sources said.
Traders reported an unusual drop in sales of BHP cargoes beginning last week, which they linked to growing market concern that CMRG may impose stricter controls. The state-run buyer has a record of tightening access to specific BHP ore types during the ongoing negotiations.
CMRG, which was established in 2022 with the stated aim of centralising iron ore purchases to secure improved commercial terms from miners, barred domestic steel mills and traders from buying BHP's Jimblebar fines in September. In November, the ban was extended to include Jinbao, another BHP variety, as talks dragged on.
Earlier in November, two iron ore traders told sources they were instructed by CMRG to seek approval before buying any BHP seaborne cargoes. Those traders said they applied for permission and had received no response.
Stocks of Jimblebar cargoes have accumulated at some of China's principal ports, reaching a record 9.8 million tonnes by February 26, traders with direct knowledge said. That represents a 457% increase compared with late September, according to two separate trade sources.
Bloomberg reported the story first.
Summary
CMRG has expanded purchasing curbs to include additional BHP seaborne grades - Mac fines, Newman fines and Newman lumps - amid a months-long contract dispute. Traders report an abrupt decline in BHP sales and mounting piles of previously restricted Jimblebar cargoes at major Chinese ports.
Key points
- CMRG instructed traders to buy fewer seaborne cargoes of BHP's Mac fines, Newman fines and Newman lumps.
- Earlier restrictions in September and November had already barred Jimblebar and later Jinbao cargoes from domestic buyers and traders.
- Accumulation of Jimblebar stocks at key Chinese ports reached 9.8 million tonnes by February 26, a 457% rise from late September - affecting port logistics and the iron ore trade flow.
Risks and uncertainties
- Continuation or expansion of CMRG purchasing curbs could further depress BHP seaborne sales and disrupt seaborne iron ore trade volumes - impacting miners, traders and port operations.
- Lack of timely responses to permission requests from CMRG creates uncertainty for traders and mills planning purchases of BHP cargoes.
- Build-up of specific ore grades at Chinese ports raises logistics and storage pressure and could influence short-term pricing dynamics in the steelmaking raw materials market.