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Mining giant doubts state-run rival will dictate commodity prices

BHP iron ore
BHP iron ore

A resources executive does not expect a nationalised competitor will decide how much mineral producers charge per tonne.

BHP recently predicted the new state-run China Mineral Resources Group (CMRG) will not dictate how much Beijing pays for Australian iron ore.

“History would say no. At the end of the day we believe that markets will sort out where prices need to be based on supply and demand,” BHP chief financial officer David Lamont said at The Australian’s Strategic Business Forum.

“We are supplying into that and obviously will meet what overall prices the overall economy and the world puts forward, so we are not worried about that.”

The remarks came after the Chinese Communist Party established the new national iron ore company, which is widely reported to centralise commodity purchases for the country’s major steel mills. It will also manage offshore project finance for Rio Tinto’s and China-backed SBM Winning Consortium’s US$20 billion (A$26.7B) Simandou Mine, 526km southeast of Conakry.

Shareholders have invested at least US$4.3B (A$6.2B) in CMRG according to Bloomberg News. The business will be jointly led by former Chinalco chairman Yao Lin and China Baowu Steel Group (CBSG) vice president Guo Bin. CBSG, Shougang and Anshan Iron and Steel are understood to have already agreed to buy iron ore through the company.

Both Rio and Fortescue Metals Group welcomed CMRG as a “new customer” for Australian iron ore.

“[We look forward to] engaging with the new China Mineral Resources Group, government and our customers to understand more,” a Rio spokesperson said ­according to News Limited.

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