In Q4 2025, a landmark agreement between Australian mining giant BHP and China is set to take effect. The deal, which mandates that the settlement of a material 30% of BHP’s iron ore sales to China in Chinese Yuan (RMB), represents a pivotal moment in not only Australia-China trade relations, but the future of global commodity markets and ultimately the US dollar’s global reserve currency hegemony.
In late September 2025, China Mineral Resources Group (CMRG), the country’s state-owned iron ore importer, issued an order to domestic steel mills to pause the purchases of BHP’s iron ore shipments denominated in U.S. dollars. Although Beijing justified the suspension on unfavorable pricing mechanisms, the timing and scope of the ban suggest a calculated strategic decision rather than a mere commercial dispute. Within weeks, negotiations between BHP and Chinese authorities resulted in the miner agreeing to settle roughly 30 per cent of its spot sales to China in Yuan, marking a decisive moment in Beijing’s efforts to reshape the monetary foundations of the iron ore market.
Iron ore is one of the few strategic commodities still overwhelmingly priced and settled in U.S. dollars, despite China accounting for more than 75 per cent of global seaborne demand. By leveraging its dominant buyer position, Beijing is seeking to shift the unit of account toward the Yuan, compelling foreign miners to internalize currency risk and anchor transactions within China’s financial orbit. Furthermore, Yuan settlement lowers China’s sensitivity to exchange-rate fluctuations and U.S. monetary policy, while bringing more of the iron ore pricing process under its own control through its exchanges and state procurement bodies.
This initiative is part of a broader endeavor to weaken the dollar’s structural hegemony in international resource trade. Since the 1970s, the petrodollar system, established through U.S.-Saudi agreements to price oil exclusively in dollars, in exchange for American military assistance and security assurances, has entrenched the greenback as the standard settlement currency for commodities. In recent years, China has promoted a “petroyuan” alternative, encouraging oil exporters to accept renminbi payments and even settling cross-border crude deals in its digital currency. Applying similar logic to iron ore — a critical input for its industrial base — allows Beijing to align the world’s largest bulk commodity trade with its monetary ambitions.
China’s move to settle more iron-ore in RMB shifts bargaining power onshore and forces miners to rethink pricing, foreign exchange rates and cash reserve management. The establishment of the CMRG as a centralised buyer turns procurement into a policy tool: it curated BHP flows, listing eight cargoes (~1.14 Mt) and clearing a 170 kt lot — signalling a calibrated squeeze of the trades than a complete stop. Letting Beijing press for better terms without disrupting mill supply.
The expansion of RMB settled cargoes will migrate price discovery towards onshore venues such as the onshore DCE contracts and away from USD benchmarks (IODEX/SGX), lifting basis risk for miners hedging in dollars. Given record Chinese imports of 116.33 Mt in September 2025 the fourth consecutive month above 100 Million tons, China has the demand depth to enable supplier rotation (Rio Tinto, Fortescue, Vale) to secure discounts or RMB-denominated terms.
Settling in RMB means miners get paid in CNY while most costs stay in AUD, making hedging and cashflow timing harder. The Yuan’s use offshore is improving but still far behind the U.S. dollar. With only about 4.1% of global payments in Mar-2025. Inside China, however, the pipes have been built at home: cross-border RMB settlement in goods hit records in 2025— Shanghai reported ~30% y/y growth and a doubling in bulk commodity flows. So buys face fewer hurdles and sellers are pulled towards RMB credit lines and letters of credit.
If the reported plan to settle about 30% of its spot sales in Yuan, it sets a landmark precedent for broader RMB use in bulk commodities. Commentators see this as a step towards commodities de-dollarisations; miners, however, will need to balance the foreign exchange costs and treasury complexity against market access.
From an international relations perspective, China’s push to chip away at the US dollar by internationalising the RMB can be understood through both an offensive and defensive lens. In 2022, following the Russian invasion of Ukraine, major western nations responded through freezing Russia’s foreign exchange reserves. With China holding significant US dollar-denominated assets, this new precedent served as a stark warning to Beijing, creating what Chinese policymakers deemed a ‘strategic imperative’ need to create a functional, alternative cross-border settlement system denominated in RMB.
The strategic rationale for this is both obvious and multi-faceted. By elevating the RMB’s global presence, Chinese enterprises see a direct, tangible decrease in their transaction costs. Additionally, Beijing will also be granted greater monetary policy autonomy, as more countries begin to adopt the Yuan as a trading currency. Currently however, the US dollar remains the global reserve currency, accounting for 88% of foreign exchange trades and 58% of global reserves. By contrast, whilst the RMB remains a minor player, with reserves sitting at 2.5%, the currency has made remarkable progress in other areas. It surpassed the euro in 2023 to become the second-largest currency for trade finance, with the recent BHP deal marking a significant continuation and acceleration of this trend.
Far from being an isolated incident, the success of the ‘Iron Yuan’ strategy has served as a potential highly replicable blueprint for other commodities where China holds the dominant position as the primary importer. Other Australian exports which remain particularly at risk include Liquified Natural Gas (LNG) as well as copper. As opposed to pursuing the traditional western route of capital liberalisation and floatation, China has leveraged its immense real-economy power to damming effect. The flow on effects of this are numerous, with the creation of offshore Yuan pools stimulating demand for Yuan-denominated financial products and services, laying the foundation for a new global RMB financial system.
More than just cutting iron-ore volumes, China’s push towards Yuan settlement is about rewriting the terms, price, and control—relocating price power and currency risks onshore, and test whether scale can move commodity pricing off the dollar. A sustained BHP arrangement would set precedence, nudging price discovery away from USD indices and increasing financial complexity for miners. Questioning whether market scale can institutionalise RMB usage across commodities without impairing supplies globally.
The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.
