China moves to regain iron ore market power
China is using the Chinese Mineral Resources Group (CMRG) to centralise iron ore buying and regain leverage after years of fragmented procurement and market volatility. Beijing aims to expand its coordination capacity and convert China’s dominant share of global demand into real market power, supported by new high-grade supply from Guinea’s Simandou mine. Whether this strategy can overcome past coordination failures or truly shift the balance of power in the global iron ore market remains an open question, but in this and other commodity markets, the actualisation of China’s decades-long attempts to overcome profound market vulnerabilities is becoming evident.
The Chinese government established the 20 billion yuan (US$3 billion) Chinese Mineral Resources Group (CMRG) in 2022 to coordinate Chinese iron ore purchases in the international marketplace. Earlier in 2025, it made headlines after asking the iron ore buyers it represents to stop buying a particular iron ore blend from BHP, one of China’s top providers, until it agreed on various terms for the coming contracts. These included a commitment to renminbi-denominated settlements.
To understand the creation of CMRG, it helps to look back to the early 2000s. At that time, the iron ore benchmark price was negotiated behind closed doors between the top Japanese consumers and major global producers — BHP, Rio Tinto and Vale — a system that had been going on for decades. Japan’s top three steelmakers accounted for roughly 70 per cent of total national steel production, giving them significant influence.
In 2006, when China took over from Japan as the lead benchmark negotiator, three years after becoming the largest iron ore importer, it faced several major challenges. The domestic industry was deeply fragmented. Baosteel, the lead negotiator, was responsible for only 6 per cent of domestic steel production in 2005 and there were over 7300 steel-producing enterprises in China. The top two Chinese importers of iron ore at that time accounted for just above 10 per cent of all Chinese iron ore imports.
Another challenge was related to China’s growing consumption, which heightened its vulnerability. The late 2000s marked the peak of a commodities supercycle and prices were rising rapidly. While Japanese buyers had coordinated their purchasing strategy effectively, Chinese lead negotiators — Baosteel and later the China Iron and Steel Association — struggled. The mechanisms needed to coordinate such a fragmented industry were weak, and individual iron ore importers had strong incentives to go around the lead negotiator and strike deals based on the emerging spot price.
By 2010, the benchmark pricing system fell apart. Over the next decade and a half, financialisation, price increases and volatility put a strain on iron ore consumers. Interviews, documentary analysis and media reports confirm that this frustrated major Chinese market actors, including the industry association. This outcome was the opposite of what they wanted: more market power over the iron ore exporters. Chinese government bodies, experts and industry insiders have openly debated this coordination failure for at least 20 years.
Sitting in the middle of a critical minerals de-risking frenzy, the Western world often treats China as dominant in the minerals sector. This view lacks nuance. China has indeed built a dominant position in the midstream segments of many critical minerals value chains, but it remains heavily dependent on international producers for the majority of the raw minerals it consumes. A 2018 PNAS study found China is more than 50 per cent dependent on imports for 19 out of 42 non-fuel minerals. China’s market power is unevenly distributed along these value chains.
The fall of the negotiated iron ore benchmark was the result of a coordination failure on China’s part. When placed in a position of market vulnerability, Chinese stakeholders have two options: consolidate and better coordinate domestically or try to unsettle global consolidation and coordination attempts.
In this case, the Chinese government appears to have pursued both. CMRG coordinates above 50 per cent of China’s total iron ore imports. Fifteen years after the benchmark system collapsed, CMRG is explicitly tasked with coordinating iron ore purchases and turning China’s market share — more than 70 per cent of the global seaborne trade — into real market power.
But why such a firm negotiating position now? After decades of setbacks and over US$20 billion of investments (including significant Chinese participation), the Guinean Simandou iron ore project delivered its first shipment of iron ore — bound for China — in November 2025. At full capacity, the mine would deliver up to 120 million tons of iron ore, or about 10 per cent of China’s annual imports.
Supply from one of the world’s largest and best deposits will dilute the market power of key Australian suppliers, whose ore quality is gradually declining. Global iron ore firms are not entirely devoid of agency — Rio Tinto is a major investor in parts of the project.
China is certainly attempting to lower the price of a commodity on which it is heavily import dependent, arguing that profit margins for key iron ore exporters have been too high. Putting the financialisation genie back in the steel bottle will be difficult, partly because a new class of market participants in China, including traders, has benefited from these trends. But the country is pushing through a more ambitious agenda to rebalance market power in the realm of commodities.
Understanding the different forms of market power internationally helps put recent developments into perspective. As Johannes Petry argues in a recent piece, and I have argued elsewhere, power in global commodity markets takes many different shapes. Chinese actors are not only looking at price levels but at the broader market architecture. This includes the location of commodity exchanges, the currency of settlement, the regulation that applies where exchanges are based and the role of Western financial institutions.
Chinese attempts to rebalance market power vulnerabilities in the iron ore marketare part of a larger, long-running exercise in pursuit of market power more generally in global commodity and critical minerals markets.
But bold actions on this front, like China’s use of export controls for rare earths and associated technologies, can also backfire. China is walking a difficult line here between its legacy pursuit of a more appropriate global economic position given the size of its economy, and facing the increasingly complex responses to the growing size of its international impact. This balancing act will define global dynamics for the foreseeable future.
Pascale Massot is Associate Professor at the School of Political Studies, University of Ottawa.