New Chinese state agency seeks to become world’s largest buyer of iron ore

China Mineral Resources Group (CMRG), a new state agency, will become the world’s largest buyer of iron ore starting next year when it starts buying for some 20 of China’s biggest steel companies, Bloomberg News reported.

The CMRG was created this year to buy raw materials for the country’s giant steel industry, as Beijing steps up its efforts to tighten control over the natural resources needed to fuel its economy.

China typically buys about two-thirds of the iron ore on the world market.

The agency has started to discuss supply contracts with the main producers, Rio Tinto Group, Vale SA y BHP Groupthe report said on Thursday, citing people familiar with the situation.

In recent meetings, officials briefed representatives of major iron ore miners about the changes, according to the report, adding that the talks have spooked top executives, concerned that China will increase its control over prices.

The world’s biggest steelmaker Baosteel has allocated the purchase of more than half of its 2023 iron ore imports to the new group, a person familiar with the matter told Reuters on Friday.

State company Baosteel could not be reached for comment.

Other steelmakers also allocated significant volumes from their iron ore purchases, the source said, declining to provide details.

It’s a political mission,” he said, adding that it is backed by the state-owned Asset Management and Supervision Commission. “The goal of this centralized buying is to lower prices.”

Rio Tinto and BHP declined to comment, Vale did not immediately respond to a request from Reuters and CMRG could not be reached.

“We remain skeptical that the CMRG will achieve its stated objective (to gain greater control over world iron ore prices), simply because supply and demand are the most important drivers of commodity prices.” said David Cachot, director of steel and raw materials, metals and mining research at consultancy Wood Mackenzie.

The benchmark iron ore contract on the Singapore Stock Exchange was down 1.48% at $109.80 a tonne at 13:13 GMT.