Renminbi (RMB)/Yuan Appreciation & Internationalization

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GulfLander

Brigadier
Registered Member
Several cargoes of BHP (BHP.AX), opens new tab iron ore were put up for sale in China on Thursday and at least one was sold to a local trader, potentially defusing concerns in Australia that Beijing had imposed a ban on iron ore sales from the world's biggest miner.
BHP sold a 170,000-metric-ton cargo to a Chinese trader on Thursday, the first day of trading after China's week-long national holiday, according to two traders with direct knowledge of the matter. The cargo was paid for in dollars, they said.
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C

CMP

Captain
Registered Member
Ah yes. Western news. The gold standard of facts and truth. Something something weapons of mass destruction in Iraq, COVID created in China, Uighur genocide, 9/11 by Taliban in Afghanistan, organ harvesting of religious people, Epstein suicided, Boeing whistleblowers suicided, and definitely nothing happening in Gaza.
 
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AndrewS

Brigadier
Registered Member
vincent said:
Most likely be fake news. No reporting from major Western news sources
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Writeup below from an Australian financial news website on BHP switching to RMB.
There's a lot of detail on the deal


discoveryalert.com.au/news/currency-shift-global-iron-ore-markets-2025/

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What Terms Did BHP Accept in the New Agreement?

The core components of the settlement agreement include:

  • 30% of BHP's iron ore spot trading with China will shift to RMB settlement
  • The agreement specifically covers CFR-based prices at Chinese ports
  • Implementation begins in Q4 2025
  • BHP's 2026 long-term contracts remain dollar-denominated for an observation period
  • Future negotiations for RMB-based long-term pricing depend on market acceptance of China's RMB iron ore index
This phased approach indicates BHP's cautious strategy, evaluating RMB settlement effectiveness in spot markets before potentially extending to larger-value long-term agreements. The observation period for 2026 long-term contracts provides time to assess the functional effectiveness of the new settlement system.

For the RMB-based pricing to succeed in long-term contracts, China's RMB iron ore index must demonstrate sufficient liquidity, transparent methodology, and resistance to manipulation—all standard requirements for commodity benchmarks under international financial standards.


How Will Settlement Mechanics Work?

The shift to RMB settlement involves considerably more complexity than simply changing the currency denomination. It necessitates integration of several financial systems and risk management mechanisms:

  • Domestic Chinese bank loan systems to facilitate buyer payments
  • Cross-border payment infrastructure, likely utilizing China's Cross-Border Interbank Payment System (CIPS)
  • Exchange rate hedging mechanisms to manage currency risk
  • Development of a closed-loop process for the entire transaction cycle
  • China's Cross-Border Interbank Payment System (CIPS) processed 134.5 trillion RMB (approximately $18.9 trillion USD) in 2023, providing the infrastructure necessary for large-scale RMB settlements globally.

The Dalian Commodity Exchange (DCE) iron ore futures contract, launched in 2013 and denominated in RMB, has already become the world's largest iron ore derivatives market by volume, providing a foundation for price discovery in the Chinese currency.
 
Maikeru

Maikeru

Major
Registered Member
AndrewS said:
Writeup below from an Australian financial news website on BHP switching to RMB.
There's a lot of detail on the deal


discoveryalert.com.au/news/currency-shift-global-iron-ore-markets-2025/

---

What Terms Did BHP Accept in the New Agreement?

The core components of the settlement agreement include:

  • 30% of BHP's iron ore spot trading with China will shift to RMB settlement
  • The agreement specifically covers CFR-based prices at Chinese ports
  • Implementation begins in Q4 2025
  • BHP's 2026 long-term contracts remain dollar-denominated for an observation period
  • Future negotiations for RMB-based long-term pricing depend on market acceptance of China's RMB iron ore index
This phased approach indicates BHP's cautious strategy, evaluating RMB settlement effectiveness in spot markets before potentially extending to larger-value long-term agreements. The observation period for 2026 long-term contracts provides time to assess the functional effectiveness of the new settlement system.

For the RMB-based pricing to succeed in long-term contracts, China's RMB iron ore index must demonstrate sufficient liquidity, transparent methodology, and resistance to manipulation—all standard requirements for commodity benchmarks under international financial standards.


How Will Settlement Mechanics Work?

The shift to RMB settlement involves considerably more complexity than simply changing the currency denomination. It necessitates integration of several financial systems and risk management mechanisms:

  • Domestic Chinese bank loan systems to facilitate buyer payments
  • Cross-border payment infrastructure, likely utilizing China's Cross-Border Interbank Payment System (CIPS)
  • Exchange rate hedging mechanisms to manage currency risk
  • Development of a closed-loop process for the entire transaction cycle
  • China's Cross-Border Interbank Payment System (CIPS) processed 134.5 trillion RMB (approximately $18.9 trillion USD) in 2023, providing the infrastructure necessary for large-scale RMB settlements globally.

The Dalian Commodity Exchange (DCE) iron ore futures contract, launched in 2013 and denominated in RMB, has already become the world's largest iron ore derivatives market by volume, providing a foundation for price discovery in the Chinese currency.
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When is this Guinea mine coming online? China should get the bul of its iron ore from there and tell BHP to shove it.
 
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