BHP concedes pricing pressure on West Australia iron ore amid China contract negotiations

Global miner BHP conceded some price impact on its West Australian iron ore business amid contractual talks with China Mineral Resources Group, but the fallout has been minimal thus far, sources told Platts, part of S&P Global Energy.

BHP made the admission regarding talks with CMRG in its Jan. 20 report for the half-year period ended Dec. 31, 2025.

"We are currently negotiating annual contract terms with the China Mineral Resources Group (CMRG). During negotiations, we continue to optimize product placement distribution channels and take actions within our operations to preserve operational flexibility and productivity. This has seen some impact to realized price," BHP said.

BHP said it would not "comment on specifics" in response to a Platts query seeking further details on its talks with CMRG.

The average realized price of BHP's Western Australia Iron Ore business achieved during the half was still up 4% year over year to $84.71/wet metric ton, according to the company's results.

In the seaborne market, however, "recent pricing suggests a relative repricing within BHP's WAIO iron ore product suite, where the product is experiencing wider discounts than in prior (seasonal) cycles," RBC Capital Markets said in a Jan. 19 note.

"We attribute this divergence to procurement leverage and benchmark dynamics rather than a fundamental shift in quality premia, with CMRG's influence driving this behavior."

Discounts for BHP products

According to the latest trades seen by Platts, BHP's mainstream medium-grade fines, Mining Area C Fines, traded at a discount of $4.30/dry metric ton over the March average of the 61% Fe indexes, while December's spot trades were at discount levels of about $2/dmt.

For BHP's Newman High Grade Fines, the discount has increased significantly from $1.05/dmt in late November when the miner first started selling on a 61% Fe index basis, to a discount of $5.30/dmt Jan. 20.

The company had also widened discounts for January term contracts across its flagship medium-grade fines products for MACF and NHGF amid ongoing term contractual negotiations with CMRG.

A north China-based source told Platts that BHP's announcement "can be seen as a compromise from both sides. It may help pave the way for mutual understanding in near-term negotiations, but it is still difficult to see the restrictions on Jimblebar fines being fully lifted."

However, "there are still leftover concerns over spot market liquidity, particularly among traders in the secondary market," an international trader source said regarding BHP's West Australian iron ore.

According to data collated by Platts, no Jimblebar Fines sales have been recorded since CMRG expanded its advisory ban to Jinbao fines on Nov. 21, 2025.

This move widened the ban that applied to BHP's Jimblebar blend fines in September 2025. While these bans "may prove temporary," S&P Global Energy CERA analysts said in a Dec. 12, 2025, note that January cargo sales could be impacted if negotiations were not yet concluded by then.

While BHP's products have been subject to notable discounts in the seaborne market, these same price concessions are not mirrored in the Chinese port stock market.

Prices for the three Australian medium-grade fines, including BHP's NHFG and MACF and Rio Tinto's PBF, are trading at parity in north China, showing resilient procurement demand from end-users for BHP's products rather than a fundamental shift in product preferences.

An east China-based source added "the widened [seaborne] discount levels have substantially reduced the buyer's cost and made it relatively cheaper, thus traders are more focused on selling brands that have better landing margins at the spot market."

In normalizing BHP's brands to the IODEX, Platts has applied additional brand spreads of $3.30/dmt and $3.55/dmt to MACF and NHGF, respectively, to account for these market-related factors affecting their prices, on top of quality and timing normalizations.

Platts assessed the IODEX at $104.45/dmt CFR North China Jan. 19, down $1.70/dmt day over day.

BHP's WAIO business posted record first-half production of 130 million metric tons, up 1% on the prior-year period. WAIO's fiscal 2026 production guidance remains unchanged at between 258 MMt and 269 MMt.

BHP attributed the results to strong supply chain performance across mine, rail and port operations.