A giant mineral resources group was set up in the Xiong'an New Area in Hebei province to give China a bigger say in iron ore pricing. With a registered capital of CNY20 billion, it will engage in exploration of mineral resources, ore mining, the import and export of minerals, as well as supply chain management services, investment activities and asset management services. The new mineral corporation's legal representative and Chairman is Yao Lin, Chairman of Aluminum Corp of China (Chinalco). Yao is the former Chairman of Ansteel Group, a state steelmaker based in Anshan, Liaoning province. China is using its strength as the world's largest consumer of iron ore to influence pricing. The firm was designed to be a platform to put together some domestic iron ore demand in a market-oriented manner, according to caixin.com.
Preparation for the new mining group dated back to mid-2020, with Yao nominated as the head of the preparatory team in the second half of 2021. The purchasing needs of state giants including China Baowu Steel Group, Ansteel, China Minmetals and Shougang Group would be included in the purview of the new Group. “China is looking to set up an iron ore purchasing group by the end of 2022 and build distribution centers at ports, as domestic industry players seek more bargaining power in iron ore trade negotiations and supply security,” according to a post on the website of S&P Global in late June, citing industry sources.
In March last year, He Wenbo, Executive Chairman of the China Iron and Steel Association (CISA), suggested that a national iron ore resources development group would coordinate overseas resources, and steadily push for the development and utilization of foreign resources, to ensure supplies. The new China Mineral Resources Group is seen as a game-changer for China's steelmaking, which has a huge size but limited bargaining power in the world. The industrial concentration of China's steel sector is weak. The crude steel output of China's top 10 steel-makers accounts for only 43% of the country's total output, while the four major foreign miners hold more than half of the world's iron ore resources. China imports 64.7% of its iron ore.
Global steel consumption has the potential to grow in the near future. China, as a major steel producer and consumer, as well as the largest importer of iron ore, should have “enough say” on the supply and market pricing of iron ore, Wu Chenhui, an independent industry analyst, told the Global Times.
