China's New Iron Ore Buyer Sets Off Biggest Shakeup in Years

China is about to upend the $160 billion iron ore trade with the biggest change in years as Beijing expands efforts to increase control over the natural resources needed to feed its economy.

A new state-owned company called China Mineral Resources Group is poised to become the world’s biggest iron ore buyer as soon as next year, when it will begin consolidating purchases on behalf of about 20 of the largest Chinese steelmakers including leader China Baowu Steel Group Corp., according to people familiar with the situation.

CMRG has already begun discussing supply contracts with top producers Rio Tinto Group, Vale SA and BHP Group, said the people, who asked not to be identified discussing private information.

The move to consolidate buying for China’s massive steel industry will give CMRG unprecedented negotiating power in iron ore, and the new company plans to seek discounts to prevailing market prices. It’s the latest in a number of attempts by China, the No. 1 buyer of almost every major commodity, to increase its influence over global markets and pricing.

Representatives from the major iron ore miners were informed of the changes by Chinese officials in recent meetings. The current structure for “term” supply contracts — in which steelmakers place orders on a quarterly basis and use a spot index for pricing — is expected to continue, with CMRG taking over responsibility for certain contracts to begin with, said the people.