China’s state-supported iron ore buyer has called in trading firms and urged them to stop purchasing new BHP Group Ltd (LSE:BHP, ASX:BHP) shipments for resale to Chinese customers after discovering that some traders had breached an earlier restriction.
China Mineral Resources Group Co (CMRG) has indicated in recent discussions with both domestic and international traders that it intends to tighten enforcement of the curbs, according to people familiar with the matter. Although the organisation does not have formal regulatory authority over Chinese steel mills that ultimately buy the ore, its strong political backing means its directives are widely treated as mandatory.
The dispute forms part of an ongoing standoff between CMRG and BHP over negotiations for long-term supply agreements on behalf of Chinese steel producers. In September, CMRG first instructed mills to halt purchases of Jimblebar blend fines, a specific grade of iron ore produced by BHP. The restrictions were later broadened to include other new BHP products priced in US dollars, including the Jinbao brand of ore.
Despite the measures, CMRG is not currently considering a comprehensive ban on all BHP products. Other grades, such as Mining Area C fines and Newman lump ore, remain available to Chinese buyers under certain conditions. These products can still be purchased through long-term contracts or via transactions coordinated through CMRG.
However, the renewed warnings against acquiring newly priced US-dollar cargoes could complicate BHP’s efforts to market shipments scheduled for April delivery, the sources said.
BHP declined to comment on commercial matters, while CMRG did not respond to requests for comment.
Since the restrictions were introduced, inventories of the restricted iron ore grades have accumulated at Chinese ports. Some shipments that were originally destined for China have also been redirected to alternative markets as traders adjust to the purchasing limits.