Confusion reigns amid BHP price talks with China while reports of iron ore ban swirl

BHP is continuing to negotiate a deal that will keep iron ore from its vast Pilbara empire flowing into Chinese steel mills, with Prime Minister Anthony Albanese calling the rumoured stalemate “concerning”.

China’s state iron ore buyer reportedly ordered steelmakers and traders to pause purchases of US dollar-denominated seaborne iron ore cargoes from the Big Australian during its annual price negotiations, sources said on Tuesday.

That report from Bloomberg was contradicted by steel market analytics firm Mysteel later that evening, which said it had verified the rumours were not true and no such order had been made.

Sources on Wednesday morning said BHP cargoes were continuing into China as commercial talks progressed.

Even so, the miner’s stock faces a horror start to trading amid the conflicting reports.

Mr Albanese said he was concerned about reports of a possible ban, noting that China had made similar moves in the past.

He said the Government wanted to ensure “markets operate properly” around the world.

“I want to see Australian iron ore be able to be exported into China without hindrance,” he told reporters on Wednesday morning.

“That is important.

“These measures are always disappointing, but let’s hope certainly that they are very much short term.

“Sometimes when people are negotiating over price, sometimes these things will occur, but I want to see this resolved quickly.”

It was reported late on Tuesday that the decision to halt purchases of BHP ore followed several meetings between the two sides since late last week that had failed to produce results.

China, the world’s largest iron ore consumer, buys about 75 per cent of global seaborne iron ore and established China Mineral Resources Group three years ago to buy ore on behalf of its steelmakers in a bid to gain more leverage as a large, single buyer and keep a lid on prices.

The Middle Kingdom has grown more willing to leverage its clout in raw materials markets in recent times, including bans on Australian commodities earlier this decade as well as export controls on rare earths this year.

BHP is China’s third-biggest supplier of iron ore behind Rio Tinto and Vale.

CMRG did not respond to requests for comment and a BHP spokeswoman on Wednesday morning said she could not comment on the negotiations.

The company has issued no new statements to investors via the Australian Securities Exchange.

“While headlines read negative, we view this as a neutral event,” RBC analysts said in a note.

“We view this ‘ban’ as more of a negotiating tactic, most likely an effort to secure lower long-term prices.”

If steel mills were pushed to buy iron ore from rivals such as Rio Tinto, Vale or Andrew Forrest’s Fortescue, cumulatively, it would cost them more and be less efficient, RBC said, adding that it would also be likely to increase miners’ pricing power as steel mills compete for feedstock.

A trading source said any such directive would cause little inconvenience to Chinese mills in the short term because they have already stocked up for the next two weeks ahead of looming public holidays.

BHP said in August that it would cut exploration spending after annual profit fell to its lowest in five years as slowing Chinese demand weighed on iron ore prices.

Singapore iron ore futures rose 1.8 per cent to $US105.05 a tonne on Tuesday.