China has challenged one of the largest suppliers of iron ore in the world
The Chinese state-owned China Mineral Resources Group Co. (CMRG) has instructed individual steel mills that consume significant amounts of raw materials from Australia's Fortescue to contact the supplier with a request regarding its new low-grade Fortune Fines product (with an iron content of 55%). This is reported by Bloomberg.
The reason for such actions was that negotiations between Fortescue and CMRG on a long-term supply contract reached an impasse, despite expectations that they would pass without complications. This move is another attempt by CMRG to strengthen its position in negotiations on iron ore trade with the world's largest mining corporations.
It should be recalled that in April, another industrial giant, BHP Group, nevertheless concluded an agreement with CMRG after a months-long standoff. It will be valid until June 2027 and provides for the use of certain price indices denominated in yuan.
Bloomberg sources point out that disputes about quality and marketing are quite common when new iron ore products are launched on the market. However, against the background of this news, Fortescue shares fell by 3.1%, reaching a low of 21.82 Australian dollars on Tuesday.
Disagreements over the Fortune Fines ore may make it difficult to reach a final deal. At the same time, the current short-term agreements of the parties may be extended for the period while negotiations continue.
Fortescue, which is the fourth largest producer of iron ore in the world, has been actively trying to strengthen its position in China this year. The company expanded the presence of its senior management in the country and noted the importance of investments in the region. Despite this, Fortescue executive chairman Andrew Forrest criticized CMRG's activities, warning that the group was actually trying to create a "cartel."