China plans to block some of Fortescue’s iron ore supplies

The Chinese state-owned buyer — China Mineral Resources Group (CMRG) — has informed steelmakers and traders of its plans to restrict access to certain stocks of Fortescue’s iron ore held in Chinese ports. This was reported by Bloomberg, citing sources.

CMRG has asked steelmakers and traders holding Fortescue’s Super Special Fines grade of iron ore to take delivery by 15 July. After this deadline, such ore will be blacklisted and subject to logistical restrictions, the sources say.

If this decision is implemented, it will escalate the dispute between the parties — negotiations between the Australian mining company and CMRG regarding long-term contracts have reached an impasse, the agency notes.

Some shipments of Fortescue’s raw materials, due to arrive in China next month, have been delayed, and fears of a potential supply shortage have led to a rise in prices for key grades of iron ore.

Neither party has commented on the situation. This is yet another example of the struggle between major mining companies and the Chinese state-owned buyer.

It should be recalled that in early June, China Mineral Resources Group instructed certain steelworks – which consume significant volumes of raw materials from Australia’s Fortescue – to approach the supplier with an enquiry regarding its new low-grade product, Fortune Fines (with an iron content of 55 per cent). This move was prompted by complications in negotiations between the parties.

Previously, BHP Group had been in a standoff with CMRG — China had been gradually tightening restrictions on its shipments amid a contractual dispute. However, the company eventually reached an agreement with the Chinese state-owned buyer in April. The contract will remain in force until June 2027 and provides for the use of certain price indices denominated in yuan.