China escalates BHP iron ore standoff

China Mineral Resources Group (CMRG) has ordered steel mills to stop purchasing a certain type of BHP (ASX: BHP) iron ore, Reuters reports.

Reportedly, the state-owned iron ore buyer has embargoed new cargoes of Jinbao fines, a type of low-grade iron ore, as part of ongoing negotiations with BHP over the annual buying contract for 2026.

This is the second ban imposed on BHP from China after the CMRG told steel mills and traders in September to stop buying Jimblebar blend fines from the major miner.

CMRG may be targeting lower-grade iron ore products as trade quantities are considerably smaller than higher-grade products and unlikely to significantly impact market dynamics.

Despite crude steel output from China hitting its lowest level in more than two years, iron ore prices hit a two-week high on Wednesday.

Goldman Sachs raised its iron ore price forecast for 2026, to an average of about $144 [US$93/t] from its earlier forecast of about $138 [US$88], expecting prices to hold at about $150/t [US$100/t] over the next few months due to anticipated restocking by steel mills along with impacts from the BHP supply issue with CMRG.

China buys about 1.1bt of iron ore per year and state-controlled CMRG is now the world’s biggest trader, coordinating about 600-700mt of that demand, according to GMK Center.

Despite the dispute, Pilbara Ports reported that iron ore shipments from Port Hedland — most of which are headed for China — hit 49.49mt in October, up 8.5% from last year.