Since the establishment of the long-term iron ore agreement mechanism in 1981, it has gone through the annual long-term agreement negotiation and the index pricing mechanism. As the world's largest consumer of iron ore, China imports more than 1.2 billion tons annually, but faces the problem of lacking pricing power in iron ore.
Since 2010, the pricing mechanism of the four major mining companies based on the Platts Index has been continuously questioned by the market for having problems of a small sample size and being easily manipulated.
It is worth noting that recently, Rio Tinto and FMG have changed the pricing benchmark for iron ore supplied to China, no longer referring to the Platts Index. In the future, iron ore pricing may enter a stage where multiple indices coexist, which will help break the monopoly of the Platts Index and reshape the global pricing landscape.
Two major miners change iron ore pricing benchmarks
It is understood that recently, steel mills under China Mineral Resources Group Co., Ltd. (referred to as China Minerals) have received notices that Rio Tinto and FMG will stop using the Platts index in long-term iron ore contracts. Rio Tinto plans to trial the use of the Fastmarkets index as a reference benchmark for iron ore shipped to China in January and February 2026, while FMG will use the average of the Mysteel index and the Argus index. Rio Tinto's existing long-term contracts were originally scheduled to expire in February 2026, and FMG's contracts were originally scheduled to expire at the end of 2025. As part of the ongoing negotiations with China Minerals, both Rio Tinto and FMG have agreed to extend their long-term supply contracts with China Minerals by 6 months.
According to public data, in 2024, the iron ore output of the four major mining companies (Vale, Rio Tinto, BHP Billiton, and FMG) was approximately 1.14 billion tons, accounting for 44% of the global output (2.604 billion tons). Among them, both Vale and Rio Tinto accounted for 12% to 13% of the output, BHP Billiton accounted for about 11%, and FMG accounted for about 8%. The four major mining companies control nearly half of the global iron ore output and more than 70% of the iron ore trade volume. The adjustment of the index pricing benchmarks by Rio Tinto and FMG this time means that the Platts index is no longer the sole benchmark for iron ore pricing.
Currently, in addition to the Platts Index under S&P Global in the United States, the Argus Index under Argus Media in Europe, the Fastmarkets Index under Euromoney Institutional Investor Group, and the CBMX Index of Beijing Iron Ore Trading Center have all provided references for subsequent pricing benchmark adjustments by other miners. It is expected that the pricing of iron ore may enter a stage where multiple indices coexist.
The supply pattern is quietly changing.
Although China is the world's largest steel producer and iron ore consumer, it has to rely on imports for a long time due to the low grade of domestic iron ore. Data shows that China's annual iron ore consumption is 1.4 billion to 1.5 billion tons, with annual imports exceeding 1.2 billion tons, and the import dependence is over 80%, while the proportion from the four major mines is over 70%.
In 2025, China's iron ore imports reached 1.26 billion tons. According to the data on China's iron ore import countries in 2025, 759 million tons were imported from Australia, accounting for 60.3%; 277 million tons from Brazil, accounting for 22%; 42.1 million tons from South Africa, accounting for 3.3%; and 23.41 million tons from India, accounting for 1.9%. China's long-term reliance on iron ore supplies from Australia and Brazil has led to a relatively concentrated pricing power in iron ore, with premium levels consistently higher than those of steel and significant cost fluctuations. Among the ferrous metals, iron ore has long been in a strong position.
It is worth noting that with the official commissioning of the Simandou Iron Ore Project in Guinea, which Chinese enterprises have been deeply involved in developing, in November 2025, the global iron ore supply pattern has gradually begun to change, and China's current situation of over-reliance on Australian iron ore is expected to be broken. According to public information, the total reserves of the Simandou Iron Ore in Guinea are about 5 billion tons, with an ore grade of 66% to 67%, and the controlled and inferred reserves that meet the standards of the Joint Ore Reserves Committee of Australia amount to 2.4 billion tons. The project is divided into two parts: the northern section and the southern section. The Guinean government holds 15% of the shares in both the northern and southern sections. Among the remaining shares in the northern section, the Simandou Winning Consortium (jointly established by Singapore's Winning International, Yantai Port Group, Shandong Weiqiao, and the French-invested enterprise UMS in Guinea) holds 51%, and the "Baolianti" (a consortium led by China Baowu Steel Group and composed of major domestic steel enterprises, infrastructure builders, and strategic investors) holds 49%. Among the remaining shares in the southern section, 53% is held by Rio Tinto, and the other 47% is held by Chinalco Iron Ore Holdings Co., Ltd., a Chinese consortium established by Chinalco, China Baowu and other companies. Overall, the total shareholding ratio of Chinese-funded enterprises in the Simandou Iron Ore Project exceeds 50%.
The Simandou iron ore project was officially put into operation on November 11, 2025. The first shipment of nearly 200,000 tons of iron ore was dispatched on December 2, 2025, and arrived at China Baowu's Majishan Port in Shengsi, Zhejiang on January 17, 2026. The long-term annual full production target of the Simandou iron ore project is 120 million tons, with 60 million tons each from the southern and northern sections, which will account for 7% to 10% of the global seaborne iron ore trade volume. At present, the progress of the northern section project under the responsibility of the Simandou Winning Consortium is relatively faster. According to CRU's forecast, the iron ore output of the northern section of the Simandou project may rise to 15 million tons in 2026, and the output of the southern section will be close to 5 million tons, with the total output expected to be around 20 million tons in 2026.
In addition, according to the plan previously disclosed by Rio Tinto, the southern mines it operates are scheduled to gradually increase their production capacity to the full load level of 60 million tons within 30 months, and the full production target will be achieved in the first half of 2028. With the completion of the permanent crushing facilities and the SimFer port with an annual throughput of 60 million tons in the second half of 2026, the iron ore production in Simandou will officially enter the ramp-up stage. And with the increase in Simandou's iron ore supply, the proportion of China's overseas equity mines will rise significantly, and the supply pattern of over-reliance on the four major mines is expected to change.
Medium and long-term supply is relatively loose
Currently, the four major overseas mining companies are still in a cycle of capacity expansion. Coupled with the gradual increase in iron ore production from Simandou over the next five years, the global iron ore supply is showing a recovery trend. China is the world's largest consumer of iron ore. In recent years, the demand for steel in the real estate sector has gradually declined. Additionally, the "dual carbon" goals encourage the production of electric furnace scrap steel with low emissions. As a result, the growth in iron ore consumption for steelmaking is expected to gradually slow down or even decrease in the future. In the medium to long term, the pattern of relatively loose iron ore supply is relatively certain.
It should be noted that the recovery of iron ore supply is a medium- and long-term process. Due to the different mining costs of various mines, short-term price fluctuations have a relatively obvious impact on mine shipments. At present, the marginal cost of iron ore from non-mainstream mines (such as those in South Africa and India) is mostly between 80 and 90 US dollars per ton. When the iron ore price is below 80 US dollars per ton, the reduction in shipments from non-mainstream mines often provides certain support to the price. Meanwhile, short-term changes in molten iron output have a more significant impact on iron ore prices, and structural issues such as inventories of PB fines can easily lead to a situation of "strong reality but weak expectations" at certain stages. In addition, for the Simandou project, the overall cost is expected to be lower than that of non-mainstream mines, but the initial infrastructure investment is large, with a total investment expected to exceed 20 billion US dollars. After amortizing the construction costs, the FOB cost in the early operation stage is expected to be between 60 and 70 US dollars per ton, and may gradually drop to less than 50 US dollars per ton in two to three years.
As the world's largest buyer of iron ore, China will see a shift in the long-term imbalance of its pricing mechanism as the global iron ore supply pattern changes. The use of the Platts Index as a benchmark for iron ore pricing may gradually decline, and a phase of multiple indices operating in parallel will help improve the issues of excessive concentration of pricing power and deviation from fundamentals.
In the medium to long term, the fundamentals of the global iron ore market will gradually shift towards a loose supply-demand balance. The pricing advantage of sellers will decline to some extent, and the downward shift of the price center will mean that future changes in demand will have a higher sensitivity to prices. The pricing advantage of buyers may gradually become apparent.
