China and Australia are fighting an epic commodity war

It’s gone largely unnoticed but there is currently an epic battle occurring between Australian mining giants and China over who sets pricing for the world’s most critical industrial input - iron ore - and in which currency.

China recently banned dollar-denominated trade of iron ore from Australia’s mining giant BHP over a dispute about pricing (interestingly, RMB trade is still allowed). Odd coincidence, within 48 hours after the ban, three people died in a gigantic Chinese iron-ore mining project that was key to China’s leverage in this battle, forcing the project’s shutdown.

China and Australia have always had a relatively fraught relationship over iron ore: they completely depend on each other, trapped in what China calls “dou er bu po” (斗而不破), which translates to “fighting without breaking up.” An insane 5% percent of Australia’s GDP depends on iron ore exports to China, as they export 85% of their iron to the country. As for China, 60% of their iron ore imports come from Australia, and 13-20% from one Australian company alone: BHP.

China’s long-time complaint has been that, despite buying 70% of the world’s iron ore, they don’t have pricing power. They need to abide by Western-controlled pricing benchmarks like Platts. Chinese analysts point out the absurdity: 2024 mining costs were “only a little over $10 per tonne” yet prices hit $130 based on these foreign benchmarks. This results in obscene profit margins for BHP, which have been standing at over 50% for many years.

In fact, incredibly, BHP’s profits alone (US$7.9 billion for the fiscal year 2024) are higher than that of the entire Chinese steel industry combined (US$5.9 billion for 2024), which goes to show the grotesque imbalance in how value is distributed along the supply chain: a single company digging rocks from the ground profits more than an entire nation’s industry that creates the actual value from those rocks.

Let’s look into the three-front war China is waging to break this stranglehold:

1. the establishment of China Mineral Resources Group (CMRG), a state entity created in July 2022 to consolidate buying power

2. the world’s largest mining project called “Simandou” in Guinea to provide alternative supply

3. China’s unprecedented move to ban dollar-denominated iron ore imports from BHP in September 2025 - as well as an oddly coincidental fatal accident at Simandou within 48 hours that killed “three foreign workers” and suspended all operations