For Canberra, it may have carried an unsettling sense of deja vu: harking back to the 2020–21 trade dispute , when Beijing targeted Australian exports including wine, barley, and coal.

The difference now is that iron ore matters more than any of those products combined. Nearly 60% of Australia's exports to China in the year to May 2024 were iron ore. Losing access to that trade would strike at the heart of Australia's economy.

To understand where China sits in these negotiations, it is necessary to rewind two decades.

Despite being the world's biggest buyer of iron ore, China has long had little influence over the price. Hundreds of steel mills cut deals separately with BHP, Rio Tinto, and Brazil's Vale. The miners spoke with one voice. The mills did not.

The result was higher costs for China, captured in a phrase often used in its media: the“pain of pricing power .” Whatever China bought, the price went up.

Attempts to push back failed. The China Iron and Steel Association urged boycotts of the miners , but mills broke ranks to secure supply.

In 2009, one Rio Tinto executive was jailed in China for alleged commercial espionage during fraught negotiations.

Then came 2010. BHP's then chief executive Marius Kloppers led a push to replace annual price benchmarks with shorter-term market-based pricing.

This change supercharged profits for Western Australian producers, who could capitalise instantly as China's demand surged. For China, it was a nightmare – less control, more volatility, bigger bills.

The creation of the CMRG in 2022 was Beijing's strategic response.

This is not old-fashioned central planning. It is state capitalism with sharper tools: centralized buying, stockpiling, and big data to support national goals. Its purpose is clear – to turn China from a price-taker into a price-maker.

Australia and China rely on each other, but not in equal amounts.

Australia is critically dependent on China for revenue. China, in the short term, still depends heavily on Australian ore. BHP alone supplies around 13% of China's imports – impossible for either side to replace overnight.

BHP is seeking alternative markets, and Beijing is investing billions in Guinea's Simandou mine, but both things will take years or decades before reaching scale.

That creates a tense balance: fighting without breaking (斗而不破). Both sides can inflict pain, but neither can afford a full rupture.

If the reports are true, the“ban” is less a final break than a negotiation tactic. It is Beijing's way of showing BHP – and by extension Rio Tinto and Vale – that the old rules no longer apply.

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The future: from iron ore to green steel

Beneath this contest lies a bigger question: who will shape the future of steel?

Traditional steelmaking is one of the world's dirtiest industries. It relies on coal, which pumps out carbon emissions. The next frontier is“green steel”, made with renewable energy and green hydrogen instead of coal.

During his visit to Beijing earlier this year, Prime Minister Anthony Albanese pitched a vision for Australia to move beyond exporting raw ore and instead sell processed“green iron” – an intermediate product on the path to green steel.

With its vast renewable resources, Australia could climb the value chain rather than remain just“the world's quarry .”

This aligns with China's own carbon-neutral goals. By flexing now, Beijing may be signalling that future cooperation on green steel will come with conditions. China will not simply be a buyer; it intends to set the rules.

Marina Yue Zhang is associate professor of technology and innovation, University of Technology Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article .

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