Chinese government steps into iron ore trade

The central government of China has established a state-owned enterprise (SOE) designed to manage the mining and inflow of iron ore into the world’s largest steelmaking country.

Metals business information firm Davis Index, citing a China-based business registration portal, says the China Mineral Resources Group (CMRG) is being established as an SOE to “supervise the entire chain of production and purchase of iron ore from Chinese companies abroad.”

Most of China’s largest steelmakers are themselves SOEs, although privately held companies also produce steel in China.

Davis Index says the company is being funded at a level of nearly $3 billion dollars, and that it will “oversee the activities of [iron] mining activity abroad.”

It is unclear to what extent participation with CMRG will be either voluntary or mandatory for steel producers. Beijing-based SOE Cofco handles some 114 million metric tons of staple food crops annually and has some 34 million metric tons of port capacity under its control. It does not, however, have exclusivity in that market.

Traders of scrap metal into China, which includes aluminum and copper and a modest amount of ferrous scrap, will likely be watching to see if the CMRG procurement model seeps into other metals industry sectors in the nation.

Reports from Bloomberg and other media sources indicate that while one of CMRG’s lead executives has a background with steelmaker Baowu Steel Group, another is a former board chair of Aluminum Corp. of China Ltd. (Chalco).