China Halts Aussie Iron Ore. Perth Property Market About To Crash? | EP109

In early October, China suddenly ordered a complete halt to purchases of Australian iron ore, and demanded that all deals be settled in Chinese currency, the RMB. It rattled Canberra so much that the Prime Minister stepped in front of the cameras to calm everyone. Why did China choose this moment? And why does the move seem aimed only at BHP? It's more complicated than it looks. If it keeps escalating, it could deal a heavy blow to Australia’s pillar industry—mining—and ultimately damage the Australian and Western Australia's economy. When mining slows, jobs openings dry up. Some economists are even warning this could trigger a fresh wave of housing-market declines, especially in Perth. Let's do a deep dive on this topic. The way this plays out—and how it ends—might be nothing like what you expect.

China Halts Purchases of Australian Iron Ore

A few days ago, China Mineral Resources Group—CMRG—suddenly called a stop to all new orders of US-dollar-priced iron ore shipments from Australian mining giant BHP. If it’s BHP’s cargo, priced in US dollars, and it’s a new order, it’s suspended. BHP supplies China with roughly 250 million tonnes of high-grade iron ore each year, about 20.8% of China’s total iron ore imports. The move shocked global commodities markets.

CMRG’s goal is to pool the purchasing power of China’s steel industry—shifting from scattered negotiations by small mills to a unified “national team.” Right now, CMRG represents more than half of China’s steelmakers in talks with global iron ore suppliers. What does that mean? China has moved from passively accepting iron ore prices to becoming a force at the table with mining companies worldwide, with much stronger bargaining power.

The moment the news broke, BHP’s share price fell 4.8%, the biggest drop since April. It steadied the next day, but market nerves were already on edge. Australia’s Prime Minister publicly said he was “concerned” and wanted it “resolved quickly.” But this isn’t just a straightforward commercial negotiation. China made it clear: only BHP iron ore that has already arrived at Chinese ports and is priced in RMB can be traded. That pushes the issue beyond price into a contest over settlement currency. Think about it—if China succeeds in pushing iron ore trade away from the US dollar, what would that mean for the global commodities market?

Timeline

If you’ve only just heard “China isn’t buying Australian iron ore,” it might sound sudden, but it’s not a snap decision. In July 2022, China set up CMRG—that’s the key turning point. Before then, even though China consumed 70% of the world’s seaborne iron ore, pricing power sat with a handful of mining giants: Australia’s BHP, Australia’s Rio Tinto, and Brazil’s Vale. These three controlled the bulk of global supply. Of all the iron ore China buys, 55% comes from them. With Chinese steel mills big and small all negotiating on their own, it was hard to gain any advantage on price.

The pivot came in September 2025. CMRG began restrictive purchases of BHP’s Jimblebar Fines. With 60.5% iron content and very high smelting efficiency, they’re a favourite among Chinese mills. But when China said “stop,” it stopped—three Jimblebar shipments that had just reached Tianjin were barred from customs clearance.

By early October, the restrictions were fully escalated. CMRG told all domestic steelmakers and traders to halt purchases of all US-dollar-denominated seaborne iron ore from BHP. The key words here are “US-dollar-denominated.” Only BHP cargoes priced in RMB and already at Chinese ports can be traded.

At this point you might ask: why target BHP and not Rio Tinto or Vale? China wanted to pick a softer target to test the waters. Of the iron ore BHP produces in the Pilbara, 82% is sold to China—so China’s leverage is significant. Rio Tinto has the massive Simandou project in Guinea, developed with Chinese partners, involving Chinalco and Baowu; touching that would cut across their interests. Vale ties into cooperation within the BRICS framework—also sensitive. That left BHP as the easier target.

Now, the standoff continues. China’s Golden Week has just ended, and everyone’s watching for the next move. BHP’s response has been fairly restrained. A company spokesperson said they “don’t comment on commercial negotiations,” while stressing that shipments from Port Hedland in Western Australia are proceeding as normal. That suggests BHP still hopes to resolve things at the table rather than take aggressive counter-measures.

But the market has started to react. Singapore iron ore futures rose 1% to $105 USD a tonne. The move isn’t huge, but there’s real concern about supply disruption. And after falling 4% on the day of the news, BHP’s share price had already rebounded to recent highs by 9 October. There are several reasons. One, markets think talks between China and BHP could well drag into 2026. Two, so far there’s been no impact on BHP’s shipments—its November and December quotas were sold long ago. Three, if the stalemate lasts, Chinese mills will turn to Rio Tinto and Vale, pushing iron ore prices higher and raising China’s procurement costs, while BHP’s iron ore will seek other buyers. It’s much like what happened a few years back when China stopped buying Australian coal—the reality wasn’t quite what many online commentators hyped it up to be.

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Coal Embargo

You might remember the coal embargo. After the pandemic broke out, for reasons everyone knows, Australia started criticising China. Let’s put right and wrong aside for a moment—if you’re criticised, you’re going to hit back. In November 2020, China moved to restrict imports of Australian coal. Customs clearance was delayed, shipments were parked indefinitely at ports—effectively a ban. In December 2020, many vessels loaded with Australian coal could only sail out and anchor offshore, with the longest wait stretching past 300 days. It looked like China had won, but the problems followed quickly. Imported coal is mainly used for thermal power generation and steelmaking. The embargo on Australian coal drove port inventories sharply lower and domestic coal prices surged by 50%. The following year, in August 2021, China experienced a nationwide power shortage with multiple rounds of rationing across regions. Households without power faced inconvenience, but factories, companies, and commercial users were also restricted. The direct and indirect economic losses are hard to quantify. A popular phrase in the influencer space at the time was the “grand chess game” theory as if there is something much bigger behind the obvious economic loss in China. But no one could tell what the bigger thing was.

During the embargo, Australia’s coal exports to China went straight to zero. Share prices of Australia’s two major listed coal companies fell 10–15%, but they later found new buyers—Japan, South Korea, India, Vietnam, and Europe—and the share prices gradually recovered. In practice, it prompted Australia’s coal industry to diversify its products and move away from China. People say that when supplies were tight, China ended up buying Australian coal that was sold to other countries first, as if they were buying directly from other countries, only paying even higher prices. Overall, the coal embargo did neither China nor Australia any good. If we’re calculating economic losses, China’s were certainly much larger.

Why bring up the coal embargo story now? Because it looks a lot like what’s happening with iron ore. The difference is that this time it’s aimed at a single company, not all of Australia, so the direct impact may be smaller. What many haven’t considered is that China still has a trump card it hasn’t played.

Impact of the Embargo

China’s steel mills support the government’s strategy, but in the short term they’ll find it tough. BHP’s iron ore—especially the high-grade Jimblebar Fines—is particularly popular among Chinese mills. If purchases stop, they have to look for substitutes, and those alternatives often cost more. According to the China Iron and Steel Association, profits at Chinese steelmakers fell by US$59 billion in 2024. With profits already down sharply, mills also have to shoulder the extra cost of finding replacement suppliers—the pressure is real. But in the long run, if China succeeds in pushing down iron ore prices, the mills will be the biggest winners. China produces more than half of the world’s steel, so even a small drop in raw material costs translates into huge overall gains.

For Australia, iron ore is the most important export. In the 2024–25 financial year, export value is expected to reach $116 billion. If China’s purchase restrictions on BHP were extended to other Australian miners, the hit to Australia’s economy would be severe. The Australian government has framed this as a “commercial dispute,” not a “diplomatic issue,” which suggests lessons were learned from the 2020 trade war.

China’s ace is the Simandou iron ore project in Guinea. It holds more than 2 billion tonnes of high-quality reserves with an iron content of 65.3%—even better than Australia’s. The southern blocks, led by Rio Tinto, are expected to make first shipments by the end of 2025, then ramp up over 30 months to 60 million tonnes a year. The northern blocks, led by Chinese firms, plan to start at the same time. Together, the two blocks will reach a combined annual capacity of 120 million tonnes. I’ve laid out the equity structure, if you are interested in details.

What does that number mean? One project at Simandou would account for roughly 10% of the global seaborne iron ore trade. More importantly, given the role of Chinese companies in the project, most of that 120 million tonnes a year will be sold to China.

For Australian miners, the threat is real. Australian iron ore may be low-cost and good quality, but it sits further away. Once Simandou’s high-grade iron ore enters the market at scale, it will pressure Australian products—especially in price negotiations, giving China more leverage.

Western Australia and the National Economy

You can’t overstate iron ore’s importance to Western Australia. The industry makes up 57.4% of WA’s merchandise exports and contributes 28% of the state’s gross product. In 2023, WA’s iron ore sales reached $139.1 billion, generating $9.4 billion in royalties. If iron ore prices fall sharply or volumes decline, WA’s fiscal revenue takes a direct hit. In the 2024–25 state budget, royalties are forecast to drop to $5.7 billion by 2027–28, mainly on the assumption that prices revert to their long-term average. Nationally, iron ore accounts for more than 20% of Australia’s merchandise exports. China is Australia’s biggest buyer, taking 80% of our iron ore exports. If that relationship is seriously damaged, Australia’s trade surplus, currency, and jobs market would all feel the pain.

The iron ore industry employs 60,000 people in WA—nearly half of all mining jobs there—and these are high-paying roles, with average wages well above those of other industries. If the sector is hit, employment is first in line. The broader knock-on effects run through services. The high spending of mining workers supports hospitality, retail, and real estate. Research from Harvard shows that during mining booms, mining-related services quadrupled their share of GDP from the baseline levels of the early 2000s.

If the sector slumps, those service jobs shrink too. After mining investment fell off a cliff in 2013–2014, both unemployment and underemployment rose sharply in WA. The state lacked other growth engines to absorb those workers, leading to widespread job losses. The economy and jobs are closely tied to housing.

Perth Housing

Perth’s housing market is more intertwined with mining than many people think. Historically, mining booms did push Perth prices higher. During the 2000s boom, Perth home values once surpassed Melbourne’s, second only to Sydney. The high incomes of FIFO workers lifted housing demand, and prices jumped quickly. But here’s the interesting part: since 2022, iron ore prices have fallen from around $230 USD a tonne during the pandemic to about $100 USD now, yet Perth property prices have been accelerating. Since the pandemic, Perth’s home values are up more than 80%, with some suburbs doubling. What does that tell us? Perth’s economy is becoming less dependent on iron ore. The big miners have started seeking and investing in new projects—copper, lithium, and gold. Perth is about to develop 11 brand-new gold mines, with forecast job growth twice that of iron ore. China may not buy Australia’s iron ore, but the world will always need gold. Against a backdrop of a steadily weakening US dollar, central banks are stocking up on gold, and prices have soared. Even if China doesn’t want Australian gold, I’m confident others will be lining up.

Today, Perth’s housing is less tied to iron ore’s ups and downs. The main drivers are relatively low price levels, very tight supply, rapid population growth, and a rate environment that’s not as restrictive as before. Even if China doesn’t buy BHP’s iron ore, that doesn’t stop other Australian companies from selling to China. Australia can sell to other countries too, just like during the coal embargo. The economy has already found other mineral pillars beyond iron ore, because anyone with a clear view knows that when a buyer becomes too dominant, you have to cultivate new buyers and new products. As for the current embargo and where this could head, I don’t think the impact on Australia’s economy will be large, nor will it fundamentally change Perth’s economy or housing market. For all we know, this could wrap up with an agreement between both sides down the track.

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