Article relating to China's plan for a central IO...

Article relating to China's plan for a central IO buyer.
https://www.theaustralian.com.au/business/*/bulk-buys-chinese-property-bailout-brings-respite-for-iron-ore-but-is-it-calm-before-storm/news-story/86b232a6d09fee7d39783f9a90688c85

Here's a snippet (whole article is worth a read):

What will China’s iron ore buyer mean?

A whole lot and not that much at the same time probably.

Commbank mining guru Vivek Dhar says similar plans have failed in the past because of the diversity of China’s steel sector.

While mergers and acquisitions have seen more of the steel sector consolidate in large state-owned companies in recent times, there remain a number of privately owned enterprises who won’t be keen on the state becoming a medium for their iron ore purchases.

“In the early 2000s, a similar plan to unify China’s iron ore purchases ultimately failed when smaller and medium‑sized steel mills opportunistically sought to lower costs for themselves than work as one large buyer,” Dhar said.

“This remains a key challenge even now. A key detail of the initiative, reported a month ago, is that Chinese steel mills would be told to report their consumption plans for consolidation into a combined figure for negotiation with big overseas suppliers.

“While the larger state‑owned steel mills are capable of this forward planning and accepting the risks that come with that, it is unlikely that private steel mills will be in the same boat. “Private steel mills would particularly be hesitant to forward plan if steel mill margins are low to negative.

”Other aspects of the new company’s remit are challenging.

Simandou is in a holding pattern, with part owner of the giant Guinean iron ore deposit Rio Tinto still unable to agree on an infrastructure JV with the local military junta and Chinese-Singaporean led consortium SMB Winning.

It’s a multi-billion dollar project supposed to be open, ambitiously, by 2025, an investment that will be less appealing if China succeeds in pulling iron ore prices down to the marginal cost of production.

At the end of the day, the reality is China’s chaotic economy is likely a much larger driver of iron ore prices.

“It’s also worth questioning the assumption that the concentration in the iron ore export sector is the cause of higher‑than‑normal prices,” Dhar said.

“Chinese policy has proven to be the more dominant driver of iron ore prices over the last 18 months.

“The reduced confidence in China’s property sector over the last week, which prompted iron ore prices below $US100/t (62% Fe, CFR China), is a case in point.”......