Some Fortescue Ltd. iron ore cargoes scheduled for delivery to China next month are being held up due to a deadlock in negotiations between the Australian miner and China Mineral Resources Group (CMRG). Chinese steelmakers are currently unable to schedule delivery for these July cargoes. This situation prompted some buyers to seek alternative iron ore supplies on Friday, leading to an increase in prices.
The impasse is the latest in a series of confrontations between major overseas mining companies and CMRG, which was established in 2022 to centralize China's iron ore procurement and enhance its negotiating leverage. Earlier this year, BHP Group was involved in a months-long standoff with CMRG before reaching an agreement in April. Fortescue is currently operating under short-term agreements that were set to expire at the end of June, and it remains uncertain whether these placeholder agreements will be extended while negotiations for long-term contracts continue.
Officials at CMRG have reportedly surveyed mills about their usage of Fortescue's ore and advised them against engaging in private discussions with the miner regarding new contract terms. The most active August iron ore futures contract on the Singapore Exchange rose 2.53% to $100 per metric ton, reaching a high of $101.2 during evening trading. A trader reported that Fortescue's Super Special fines stocks in major Chinese port cities stood at 7.22 million tons as of June 30, representing nearly 5% of China's total portside iron ore stocks.
In a related development, CMRG verbally instructed some Chinese mills on July 15 that they should not accept portside cargoes of Fortescue's lower-grade iron ore products, Super Special Fines and Fortune Fines. This directive follows a previous instruction from CMRG last month, advising domestic steelmakers not to discuss a new iron ore product, Fortune Fines, which was scheduled for July shipments, with Fortescue. Fortescue confirmed that its China president left in June, just four months after assuming the role. The official reason for some delays at Caofeidian port in northern China was cited as solid waste inspection protocols, though market observers interpret this as a strategic pressure tactic by CMRG.
