Iron: Australia weighs response to China monopsony – Rabobank

Rabobank’s Senior Market Strategist Benjamin Picton highlights moves by Australia’s iron ore majors to counter China’s growing monopsony power in the iron ore trade. With China’s new state-owned buying group pushing for CNY settlement, Australian producers supplying over half of global iron ore are exploring state-backed marketing options, taking cues from Indonesia’s single-desk approach in coal, palm oil and ferroalloys.

Canberra pressed on pricing power response

"While China’s reduction in oil imports helps planet earth rebalance energy flows, movements are afoot in Australia to counter Chinese monopsony power over the iron ore trade."

"China recently formed the state-owned China Mineral Resources Group to coordinate purchases of iron ore cargoes for China’s steel industry and exert market power to ensure that suppliers are paid in CNY, rather than USD."

"Australian firms supply more than 50% of global iron ore, but those firms have seen their market power eroded by alternative supply coming online in west Africa and an inability to coordinate to counter Chinese market power."

"The Australian Financial Review this morning reports overtures from iron ore majors to the Australian government to counter monopsony buying power and give producers more say over how much they are paid and in which currency."

"Australia’s second-closest neighbour recently did just that for coal, palm oil and ferroalloys, and has the world’s largest reserves of nickel – a critical input for Chinese stainless steel and EV battery production."