The Chinese state-owned company China Mineral Resources Group Co. (CMRG) has reached out to individual steel enterprises in the country that are major consumers of raw materials from Australian Fortescue, requesting them to send an official inquiry to the supplier regarding its new low-grade product Fortune Fines with a 55% iron content.
This is reported by Finway
Delay in Negotiations and New Demands from China
This move by China is a response to the fact that negotiations between Fortescue and CMRG regarding a long-term iron ore supply contract have reached an impasse, although initially the parties expected a smooth conclusion to the agreements. Experts believe that these actions are part of CMRG’s strategy to strengthen its influence in the iron ore market and seek more favorable terms in collaboration with leading mining companies worldwide.
For comparison, in April of this year, another industry giant, BHP Group, after prolonged negotiations, signed a contract with CMRG that will be valid until June 2027. The agreement includes the use of price indices denominated in yuan, reflecting China’s desire to expand the influence of its currency in international raw material trade.
Market Impact and Fortescue’s Reaction
According to sources, discussions about quality and marketing features are a typical stage for introducing new iron ore products to the market. However, due to this situation, Fortescue’s shares lost 3.1% of their value, reaching 21.82 Australian dollars on Tuesday — the lowest level in recent times.
Discrepancies surrounding the Fortune Fines product could pose a significant obstacle to finalizing a long-term agreement between the parties. At the same time, market participants note that existing short-term agreements may be extended during further negotiations.
Fortescue, which is among the top four iron ore producers in the world, is actively seeking to strengthen its position in the Chinese market by 2026. The company has expanded the presence of its top management in China and emphasizes the strategic importance of investments in the region. Meanwhile, Fortescue’s Executive Chairman Andrew Forrest has repeatedly expressed concerns about CMRG’s actions:
“The group is essentially trying to create a cartel.”