The Executive Chairman of Fortescue Ltd., Andrew Forrest, has urged the Chinese state iron ore purchaser to reconsider its tactics aimed at lowering the cost of this strategic raw material. He emphasized that such a stance could harm the Australian economy, which is one of the leading suppliers of iron ore in the world.
This is reported by Finway
Supply Restrictions and Impact on the Global Market
Forrest noted that the China Mineral Resources Group Co. (CMRG) is employing mechanisms reminiscent of cartel formation to influence iron ore prices in the global market. According to him, CMRG acts on behalf of Chinese metallurgical enterprises, negotiating purchases with major mining companies, including Fortescue, Rio Tinto Group, and BHP Group.
“CMRG has already influenced the global iron ore market by acting on behalf of metallurgical enterprises and negotiating prices with the largest mining companies, including Fortescue, as well as larger Australian competitors – Rio Tinto Group and BHP Group. In particular, negotiations with BHP have deteriorated, leading to a ban on the supply of certain types of iron ore from this company.”
Recently, relations between CMRG and BHP Group have significantly worsened, resulting in restrictions on the supply of certain categories of iron ore from BHP. This has created additional risks for price stability and supply in the global market.
Call for Cooperation and Financial Support
Andrew Forrest highlighted the need to strengthen cooperation between Chinese banks, equipment manufacturers, and Australian mining companies. In his view, instead of manipulating prices, China should focus on purchasing domestically produced mining equipment and attracting financing from mainland banks to support the mining sector.
Fortescue has already secured a $2 billion loan from Chinese financial institutions and purchased electrical equipment for its operations in China. In the first half of the current financial year, the company exported over 100 million tons of iron ore, the majority of which was supplied to China.
The situation in the iron ore market remains tense, and the further development of events will depend on China’s position regarding cooperation with international raw material suppliers.