A fairer, more transparent, and more sustainable new order for the iron ore market is gradually taking shape

For a long time, the iron ore industry chain has exhibited a structural imbalance between upstream and downstream segments. The stark contrast between international mining giants “swimming in money” upstream and domestic steelmakers “struggling to survive” downstream has been a persistent feature. This uneven and unreasonable distribution of interests along the value chain has hindered the healthy and sustainable development of the entire industry. In recent years, calls from all sides for rule reconstruction and value restoration have grown increasingly loud. The iron ore market landscape is now undergoing profound adjustments, and a fairer, more transparent, and more sustainable new market order is gradually being established.

First, China has used the “constant” of its mega-scale market to offset the “variables” in global supply. As the world’s largest consumer of iron ore, China’s relatively stable production rhythm and efficient logistics coordination have effectively mitigated the impact of uncertainties on iron ore supply. This market absorption capacity and buffering mechanism provide clear forward guidance for international mining companies, encouraging them to make long-cycle, large-scale capital investments in upstream resource exploration and development. In this sense, the stability and vastness of the Chinese market have underpinned the continued growth of global iron ore production capacity.

Second, a diversified resource supply system is being built. In recent years, the pace of global iron ore development and investment has accelerated, with major projects in West Africa and other regions being completed and put into operation one after another. This has smoothed the supply curve, optimised resource allocation and supply patterns, enhanced market resilience, and fostered fairer and more adequate market competition. Such “supply-side” efforts are conducive to reducing operating costs and risk premiums across the entire industry chain and supply chain, ultimately benefiting all steel enterprises.

Third, there is now a broad consensus on resolving the structural imbalance of interests between upstream and downstream segments. From an objective perspective, building a healthy industrial ecosystem does not mean a zero-sum game between upstream and downstream enterprises. Instead, cooperation models should be improved to promote a more equitable distribution of profits across all links of the industry chain, achieving mutual benefit and win-win outcomes. In the specific context of iron ore, only when downstream steelmakers enjoy a fair market position, equal bargaining power, and reasonable operating returns can stable and sustainable iron ore demand be sustained – which in turn allows upstream mining companies to secure long-term and stable earnings.

Finally, a more objective and transparent iron ore pricing mechanism is gradually being established. For a long time, the USD-denominated index pricing has largely been based on transaction prices from a small number of international mining companies in the dollar market. China, however, has the world’s largest port-side spot market, where transaction prices can reflect supply-demand conditions more objectively and accurately. The development of a renminbi-denominated iron ore price index system offers an important price reference beyond the dollar index, which helps enhance the representativeness and transparency of price formation. Promoting the use of renminbi price indices in international trade will help curb capital speculation and enable prices to better reflect changes in supply and demand – a significant improvement to the global iron ore pricing system.