China's State-Backed Iron Ore Buyer Pauses Some Rio Tinto Purchases, Bloomberg Reports

China's state-backed iron ore buyer has instructed some steel mills to hold off on buying Rio Tinto's Pilbara Blend product as contract negotiations with the Australian miner reach a critical stage, Bloomberg reported on Tuesday.

China Mineral Resources Group Co. (CMRG) informed mills that negotiations with Rio are at a pivotal point and that they should avoid discussing purchases with the miner for the time being, according to people familiar with the matter cited by Bloomberg News.

No specifics were provided regarding the terms being negotiated or the potential timeline for an agreement.

CMRG was set up in 2022 to centralize China's iron ore buying and enhance Beijing's influence over commodity prices. China contributed close to 60% of Rio Tinto's revenue in the previous year, Bloomberg noted, highlighting how crucial the relationship is for the mining company.

This tension mirrors recent challenges faced by Rio's Australian counterparts. BHP Group, after lengthy discussions, reached a one-year deal with CMRG that runs through June 2027 and includes expanded use of yuan-denominated pricing. Fortescue, in turn, has experienced reduced sales to Chinese customers while negotiating conditions with the state-backed entity.

Established to aggregate iron ore purchases and strengthen China's negotiating position as the largest global consumer of the steelmaking material, CMRG's decision to pause talks could increase pressure in its price and supply negotiations with Rio. However, the sources cited by Bloomberg offered no specifics on the points of contention.

In a separate development, Rio Tinto on Tuesday agreed to acquire the Aurukun bauxite project in Queensland from Glencore and Mitsubishi Development for an undisclosed price. The transaction is still conditional on approval from Queensland state authorities and other Australian regulators. The project is still being developed and lacks a mining lease.

The Aurukun acquisition provides a prospective long-term bauxite asset close to Rio's current Cape York operations, yet the company's near-term attention is probably centered on its ongoing discussions with China's state-backed iron ore buyer.