Major Breakthrough between China Baowu, Baosteel and Vale, the World's Largest Iron Ore Supplier
Baosteel and Brazil's Vale, the world's largest iron ore supplier, recently completed the RMB cross-border settlement for a portion of imported iron ore under the long-term agreement. The total settlement amount is about 330 million Yuan (equivalent to nearly $50 million). This signifies that China Baowu and Baosteel have achieved a new breakthrough in the use of RMB cross-border settlement with the world's major mining companies in the procurement of bulk raw fuels. It shows an important step forward for promoting the internationalization of RMB. By conducting RMB cross-border settlement of imported iron ore, domestic buyers can effectively avoid the risks caused by exchange rate fluctuations. For overseas mining companies, with their increasingly close business ties with China, the risk of exchange rate fluctuations can also be reduced through RMB cross-border settlement during trade.
Baosteel is the first state-owned steel company in China to carry out such business. Since 2019, Baosteel has continuously promoted the RMB cross-border settlement of iron ore trade with foreign suppliers. Preliminary attempts have been made in trade of the iron ore produced in South Africa, Ukraine and other countries with several internationally renowned mining companies and traders, involving a total amount of about 240 million yuan (35 million US dollars) of contract. At present, Baosteel has basically established an operating process for RMB cross-border settlement of imported iron ore. The transaction also shows the concern and recognition of foreign mining companies, especially industry giants, in conducting related businesses with Baosteel.
China Baowu and Baosteel will build on previous cooperation and continue to communicate with the world's major mining companies based on the principle of mutual benefit, to further expand the scale and scope of cross-border settlement using RMB, stabilize transaction objects and quantities, and improve transaction models and rules to continuously increase the proportion and market influence of RMB cross-border settlement in iron ore import trade.