Billionaire Andrew Forrest’s Fortescue Metals Group has become the latest major mining company targeted by China’s push to force down iron ore prices, putting future revenue from Australia’s most valuable export commodity under pressure.
Fortescue, the nation’s third-largest iron ore producer, on Friday confirmed it was locked in contract discussions with China Mineral Resources Group (CMRG), Beijing’s centralised buyer created to leverage the country’s massive purchasing power against foreign suppliers.
Fortescue insisted it would continue to push for a swift return to normal market-led conditions despite mounting pressure from Beijing.
“It’s the latest example of trade friction affecting the iron ore industry, undermining the stable supply of iron ore to China,” Gus Pichot, Fortescue’s chief executive of growth and energy, told analysts on Friday.
“We hope to see a return to normal market conditions as soon as possible.”
Iron ore, the key raw material use to make steel, is Australia’s single biggest export, generating more than $100 billion a year in export earnings, meaning even a minor decline in pricing could have a significant impact on state and federal government revenue and the broader economy.
Iron ore routinely accounts for as much as 5 per cent of Australia’s gross domestic product. China is the biggest buyer of the commodity from Australia by far.
However, the stand-off over pricing and future supply terms with Fortescue presents the latest test of China’s attempt to use its enormous purchasing power to drive down the cost of iron ore. Since its establishment in 2022, CMRG has sought to consolidate the bargaining power of Chinese steel mills in contract negotiations with suppliers, including Australia’s BHP, Rio Tinto and Fortescue.
Fortescue has declined to confirm or deny reports, published in Reuters and Bloomberg, that suggest Beijing has told steel mills and traders to restrict or delay imports of some of Fortescue’s specific iron ore products in a bid to gain leverage.
BHP, the largest Australian mining company, came under pressure from CMRG during contract negotiations last year. According to media reports at the time, CMRG ordered Chinese steel to halt any new dollar-denominated purchase deals for BHP iron ore.
Fortescue on Friday said a return to “normal market conditions” would be the best outcome for Chinese steel mills and their Australian trade partners that had been their reliable suppliers for decades.
“We continue to engage with CMRG through respectful, patient and good-faith negotiations, grounded in fair and proper market prices,” Pichot said. “This company was founded on fair market prices, and we believe it should continue that way.”
Fortescue said China remained its major market, but it would also continue exploring alternative destinations for its iron ore, such as major growth economies of South East Asia and India.
China, Australia’s biggest trading partner, has appeared increasingly willing to use its market clout to exert pressure on its suppliers of key commodities. In 2020, Beijing slapped an unofficial ban on Australian coal amid a diplomatic stoush with then-prime minister Scott Morrison, leaving dozens of coal ships stranded at sea for months, unable to dock at Chinese ports.
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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.From our partners
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