“This could be the biggest market shake-up since the end of the annual contract system back in 2010,” says Morgan Stanley strategist Marius van Straaten.
China’s improved buying power under a centralised iron ore purchasing arm will eliminate the extremes of iron ore price volatility, but will be less helpful in achieving its objective of lowering high prices.which was floated around six months ago has returned to the headlines as the new China Mineral Resources Group takes shape.
The group started discussions in December with BHP Group, Rio Tinto and Vale, Bloomberg reported at the time. Baosteel allocated half its 2023 purchases to the group, Reuters subsequently revealed.“While we don’t see a reason why iron ore miners would offer outright discounts, it will be harder for iron ore miners to have Chinese steel mill[s] competing with each other for ore during times of severe tightness, when the market is in ‘flare up’ price regime,” broker Morgan Stanley concluded.
Fewer buyers bidding against each other and the ability for the cartel to build its own reserve of inventory will be supportive of moderating prices, Morgan Stanley argued.
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