BHP Shifts Focus to Southeast Asia Amid China's Record Iron Ore Stockpile
In a strategic move to counter escalating trade tensions, BHP is increasingly targeting steel mills in Southeast Asia as China accumulates an unprecedented iron ore stockpile. According to recent data, the volume of iron ore stored at Chinese ports has surged to a record 163.3 million tonnes this week, marking a year-on-year increase of over 15 per cent. This massive stockpile empowers the state-run China Mineral Resources Group (CMRG) to exert greater leverage in its ongoing trade dispute with the Australian mining giant.
China's Pricing Pressure and BHP's Response
CMRG has reportedly expanded restrictions on purchasing new seaborne iron ore cargoes from BHP's Western Australian mines. The Chinese entity is pushing for BHP to lower its iron ore prices and conduct most transactions in Chinese yuan rather than US or Australian dollars. With BHP historically shipping between 80 to 90 per cent of its iron ore to China, the company is now actively exploring alternative markets to mitigate the impact of this dispute.
Data reveals that BHP's shipments to Vietnam, which typically account for 1 to 2 per cent of its exports, jumped to approximately 4 per cent in February. Similarly, exports to Indonesia, usually around 1 to 2 per cent, increased to 3 per cent during the same month. Consequently, BHP's shipments to China in February stood at 81 per cent, which is on the lower end of its historical average, indicating a deliberate shift in strategy.
Growing Demand in Southeast Asia
Tim Hard, Argus Media's senior vice president of Asian ferrous markets, highlighted the robust growth in iron ore demand from Vietnam and Indonesia. He noted that consultants forecast these two countries will collectively produce 50 million metric tonnes of steel annually by 2027, a significant rise from the 20 million metric tonnes poured across all of Southeast Asia in 2007, with Malaysia leading this expansion.
Hard described this trend as a "big sea-change and one with legs to run," emphasizing its long-term potential. Over the past five years, Indonesian steel production has experienced a compound annual growth rate of 8.1 per cent, while Vietnam's rate is 3.9 per cent. Both rates are expected to accelerate in the coming years, presenting lucrative opportunities for BHP as it seeks to diversify its customer base beyond China.
This strategic pivot comes at a critical time as China's record iron ore stockpile strengthens its bargaining position, forcing BHP to adapt and explore new markets in Southeast Asia to sustain its global operations and revenue streams.
