Miningweb: China’s iron grip - from junkyards to global market power

Key topics:China shifts from iron ore consumer to global supplier and competitorScrap metal now rivals mines, fuelling China’s steel production growthDomestic steel demand falls, boosting reliance on recycled iron sources.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By David Fickling.Only start a fight if you think you can win it. That’s the lesson of China’s battles over commodities in recent years. Beijing has often threatened to weaponise its control over rare earth magnets — but waited to pull the trigger until this year, when the US was at its most vulnerable amid President Donald Trump’s scattershot trade war. In helium, a strategic high-tech element where China had been almost entirely dependent on US resources, it has spent years quietly building up Qatar as an alternative supplier to reduce Washington’s leverage. That backdrop helps explain what’s happening right now in the market for iron ore.The raw material is China’s biggest single import after computer chips and crude oil, with $133 billion spent last year on supplies from Australia, Brazil, and a handful of other countries. Beijing in September ordered steelmakers not to buy cargoes from BHP Group Ltd., amid a pricing dispute with the world’s biggest miner..Read more:.Miningweb: BHP-China iron ore dispute escalates, risking months of trade gridlock.This may well be the first major fight in which companies that grew rich providing China with raw materials find themselves contending with a destabilizing wave of “scrapitalism.” Sitting atop colossal stockpiles of aging metal from its own industrialisation, Beijing is turning itself from a pure consumer of basic commodities into a supplier and competitor..Such strongarm tactics would have been unthinkable 15 years ago. Needing billions of metric tons of steel to build apartment blocks, factories, highways, railways, machinery, cars and trains, China’s leadership was worryingly dependent on just three companies: BHP, Rio Tinto Plc and Brazil’s Vale SA.Sensing an opportunity, BHP and Vale in 2010 pushed for a new pricing mechanism based on the spot market, rather than the annual contract negotiations that had prevailed previously. That resulted in vastly higher costs for China’s steelmakers and bumper profits for BHP’s shareholders.The cards are finally turning back in Beijing’s favor. One part of the story is happening in Guinea, where the first ore from the Simandou pit developed by Rio Tinto and its largest shareholder, Aluminum Corp. of China, or Chinalco, is currently being railed to port. The partners aren’t the best of friends. State-owned Chinalco turned up on Rio’s share register in 2009 to scotch a planned takeover by BHP — itself a telling demonstration of China Inc.’s determination to bolster its bargaining power in the iron ore market. Rio would now be keen to offer its stake in the African mine in return for Chinalco selling down its stake, Reuters reported last week..The more important part of the story, however, is happening closer to home. China Resources Recycling Group Co., established just 12 months ago, is attempting to consolidate the country’s sprawling scrap sector to generate as much as 260 million tons of ferrous waste a year. That’s an inevitable consequence of the steel boom of the past two decades. As cars are junked, appliances replaced and buildings demolished, an immense new resource of recyclable metal is opening up in China’s cities. It’s being accelerated by a vehicle and appliance trade-in policy that’s already sucked in more than 10 million automobiles this year.With Simandou and its own junk heaps starting to pump out iron, China’s position in the steel raw materials sector is as strong as it’s been in a generation. Domestic demand, meanwhile, is collapsing. The floor space of newly-started homes this year is the smallest since 2005, and steel output is at the lowest level since 2018.It’s a crucial shift. Since the dawn of the Industrial Revolution, humanity’s urbanisation and economic development has been built upon our ability to extract ever-increasing volumes of iron ore from the earth. The sheer quantity of metal left over by this process, however, means that our junkyards are now as productive as our mines..Read more:.Miningweb: China’s coal strategy signals longer reliance on fossil fuels.Unless we’re envisioning a Wall-E future buried under a mountain of waste, the iron is going to end up getting consumed. The share of scrap in the world’s steel will rise from about 30% in 2023 to 40% in 2030 and 50% in 2050, according to a recent study by Baoshan Iron & Steel Co. Output of refined iron ore won’t rise appreciably above its level in 2023. All the remaining growth comes from recycled metal.China’s leaders have long urged the country to “hide your strength and bide your time” — exhorting players not to throw their weight around until they’re powerful enough to use it decisively. With iron ore in the future, as with rare earths right now, we may be approaching the inflection point where the country’s muscle as a supplier matches its heft as a consumer. In this brave new scrapitalist world order, China’s junkyards will be a more important resource than any single miner..© 2025 Bloomberg L.P.

Miningweb: China’s iron grip - from junkyards to global market power

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