Yuan-denominated iron ore trade on the rise, boosts China’s pricing influence
China Baowu Group, the world's largest iron and steel complex, completed a yuan-denominated, blockchain-technology-based transaction of more than 100 million yuan ($14 million) with Rio Tinto on Monday, a move signaling the rising influence of Chinese currency in pricing major commodities.
Baowu said that settling part of its massive iron ore purchases in yuan reflects its "operational needs" and meets the trend of the yuan's globalization trend.
"Such trade is attractive to multinational companies with an interest in long-term cooperation in the Chinese market," the company said on its WeChat account.
"The deal is a sign that the scale of yuan settlements is increasing in the iron ore trade, where China is heavily reliant on imports," said Wang Guoqing, research director at the Beijing Lange Steel Information Research Center.
Monday's transaction marked the completion of a trio of deals between Baowu and the world's top three iron ore suppliers. In January, Baowu completed its first yuan-denominated deal worth 330 million yuan with Vale, the world's largest iron ore supplier. That was followed by a 100 million yuan deal in April with BHP.
Chinese steel mills have been seeking more yuan-denominated deals instead of US dollar to avoid losses incurred from foreign exchange rate fluctuations.
