Iron ore pricing competition intensifies! China's new procurement rules hit BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs(BHP.US) Goldman Sachs Group, Inc.: Could face a $2 billion impact.

According to a report by the Goldman Sachs Group, Inc., due to China's restrictions on purchasing the Jimblebar iron ore, discounts have widened and lump ore premiums have plummeted, potentially putting pressure on BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs (BHP.US) of up to $2 billion. Analysts led by Matt Green pointed out in a report dated January 27th that these restrictions may result in incremental discounts on the company's main iron ore fines products in the spot market, leading to approximately $1 billion in annual losses. Additionally, discounts on lump ore products could result in another $1 billion in revenue impact, with the discount on Newman lump ore driving an 80% plunge in premium. China implemented these restrictions in September last year in order to enhance its bargaining power as the world's largest iron ore buyer with top suppliers, advocating for better terms for its massive steel industry. The report stated that this initiative, spearheaded by the China Minerals Resources Group Limited under state ownership, is reshaping the market pricing mechanism long dominated by benchmark sea freight prices. Goldman Sachs Group, Inc. cautioned that its estimates, taking into account factors such as product mix, time lag, and contract terms, may not fully represent actual transaction prices, but provide a framework for evaluating current pricing dynamics. A spokesperson for BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs declined to comment. The company stated last week that annual contract terms with Sinomine Resource Group are still under negotiation. Analysts said, "Our communications suggest that these restrictions are expected to continue beyond the Spring Festival. BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs is currently enduring pricing pressures, but maintaining its preferred pricing framework may preserve greater value in the long term." Since the implementation of the restrictions, iron ore inventories at Chinese ports for Jimblebar ore have remained high, with some cargoes struggling to find buyers and being diverted to other markets. Analysts added that the decline in lump ore market premiums is also affecting the pricing of the Pilbara Blend produced by Rio Tinto plc Sponsored ADR group, which could potentially result in approximately $1.2 billion in revenue impact for the company. A spokesperson for Rio Tinto plc Sponsored ADR also declined to comment.