Explained: How China Is Pushing For Yuan Payments And Its Impact On Iron Ore Trading

Australian mining company BHP Billiton has inked a groundbreaking pact with Chinese buyers to settle 30% of its iron ore spot deals using the Chinese yuan (RMB) instead of US dollars. The arrangement, set to take effect in Q4 2025, represents a notable departure from standard commodity trading practices and may indicate a realignment in the global iron ore price landscape.

The agreement goes far beyond a basic shift in currency use. Industry insiders note that it involves linking domestic lending, international payment networks and exchange rate hedging to create a fully self-contained financial cycle. This intricate framework highlights how strategically significant the arrangement is for both sides.

As per a report in Discovery Alert, BHP delivered nearly 295 million metric tonnes of iron ore to China in 2024. Around 30% of these transactions were settled in RMB, accounting for roughly 88.5 million tonnes: an amount estimated to be worth between $8 and $10 billion annually.

Iron ore remains among the last major commodities largely traded and priced in U.S. dollars, even though China consumes over 75 per cent of global seaborne supply. 

Now, using its immense market leverage, Beijing is pushing to realign trade towards the Yuan, effectively transferring currency exposure to overseas miners and tightening the grip of its financial system on the global iron ore trade.

In addition, settling transactions in Yuan helps insulate China from the impact of currency fluctuations and shifts in US monetary policy. It also enables Beijing to exert greater influence over iron ore pricing by funnelling trades through its own exchanges and state-run purchasing agencies.

As per a Fastmarkets report, over time, many Chinese steel producers are aiming to buy or price iron ore in Yuan, driven largely by the growing volume of trades taking place at domestic portside markets.

The report said that buyers underlined that sourcing from local markets offers greater flexibility in both quantity and pricing than the long-term, large-scale agreements typically used in the seaborne trade.

Fastmarkets notes that currency risk continues to be a major hurdle. A Singapore-based source in the iron ore sector told Fastmarkets that many remain doubtful about a full shift to Yuan-based payments, questioning how much of the Chinese currency large corporations can realistically retain when their operations are primarily denominated in US dollars.