Iron ore giant Rio Tinto's trade with China

Shanghai Daily confirmed from the industry that Rio Tinto, an Australian iron ore giant, has signed an iron ore trade contract with domestic enterprises in the form of RMB. Relevant experts believe that this event will contribute to further internationalization of the RMB. As for iron ore trade, it remains to be seen whether there will be more enterprises and varieties priced in RMB next. The reporter learned from many sources that the business priced in RMB was the trade contract signed by Rio Tinto and Shanxi Gaoyi company, specifically 170000 tons of SP10 powder and block ore, which were delivered in Rizhao port.

This is Australia's first supply contract denominated in RMB. " Wang Guoqing, director of the Lange Iron and Steel Research Center, said Rio Tinto was the second of the three major overseas mining companies to use Renminbi. Since 2017, Vale of Brazil has started the normal RMB settlement in the process of iron ore trade with Chinese steel enterprises. In addition, FMG, the world's fourth largest iron ore producer, set up a subsidiary in China to sell small quantities of products denominated in RMB, and the company completed its first RMB transaction in June this year. Overseas mines use RMB to price Chinese enterprises. First, they reduce the risk of foreign exchange settlement of domestic enterprises and the loss caused by the fluctuation of international exchange rate; second, they reduce the cost of foreign exchange settlement due to the reduction of the link between us dollar and foreign exchange; third, they are conducive to the settlement of enterprises in the process of importing iron ore more convenient and promote the completion of transactions.

Wang Yangwen, senior analyst of the global price team of Proctor's iron ore of S & P, said that Chinese steel mills have a high habit of port procurement. Since steel mills can have two channels of US dollar procurement and RMB procurement, it is reasonable to have one more sales channel for the mine. The RMB sales model helps to cover Chinese companies that did not participate in or less participate in the US dollar iron ore trade of Haipiao. Now another mine chooses diversified sales channels and modes to bring the market to China's ports and closer to China's market. The price is bound to follow the market, which is beneficial to China's steel mills in general. However, Wang Yangwen also mentioned that Rio Tinto only plans to sell SP10 products in RMB, not Pb powder and Pb block. Some market views think that Rio Tinto is still in the trial stage and does not want to change its sales strategy in USD market. In addition, Vale currently only sells BRBF single products. Stone, deputy director of CSIC Futures Research Institute and chief analyst of ferrous metals, said that with the iron ore futures of GSE gradually becoming the most influential futures in the global iron ore field, the market is paying more and more attention. In addition, China is the world's largest iron ore consumer and iron and steel producer. It will be sooner or later for foreign mines to adopt RMB pricing. This will be conducive to domestic ore traders and steel mills to adopt more flexible means of purchase and sales, to the promotion of point price trading, the combination of period and present, and to the internationalization of RMB.