BHP Group Ltd (ASX: BHP) shares fell more than 1% in early trade on Wednesday as rumours circulate about a supposed ban on iron ore exports to China.
BHP told The Motley Fool early on Wednesday that "we do not comment on commercial negotiations", after being asked about the report from Bloomberg, citing unnamed sources, that China's steelmakers and traders had been directed to temporarily halt all purchases of BHP commodities.
The Bloomberg report was widely reported, helping send BHP's London-listed stock 1.9% lower in overnight trade. The company's ASX-listed shares were 1.2% lower in early trade at $42.
Follow-up media reports in outlets such as The Financial Review this morning, however, are leading with the line that the story is "untrue".
BHP is understood to be continuing to ship products, including its Pilbara iron ore from Western Australia to China on an "as normal" basis.
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World's lowest cost major producer
BHP's Western Australia Iron Ore (WAIO) operations are the world's lowest-cost major iron ore operations according to the company, and produced a record 257 million tonnes of iron ore in FY25.
The company also produces iron ore from its Samarco open cut mine in Brazil, which it owns a half stake in.
China created a state-owned entity, China Mineral Resources Group (CMRG), in 2022, to coordinate the country's iron ore purchases in a bid to get better prices from the global top tier miners such as BHP.
The reports circulating in the past day or so allege that after weeks of negotiations between the state-controlled buyer and BHP, no agreement has been reached, and thus, a purchasing ban was put in place.
The Financial Review reported in mid-September that CMRG had told China's steel mills to temporarily stop using a popular product – Jimblebar blend fines – in a bid to put pressure on the company.
Those reports were also not attributed to named sources.
BHP shares have performed well over the past week, along with other copper producers, following Freeport-McMoRan's announcement last week that mining at its major Grasberg Block Cave Mine in Indonesia had been halted following a fatal mudslide incident.
Iron ore expansion on the cards
BHP said in its annual results release in August that it is planning to increase its iron ore production at WAIO to more than 305 million tonnes per year over the medium term.
On the outlook for the commodity, the company said, "We maintain our view that China's steel production is likely to maintain its plateau around the one billion tonne level until the late 2020s".
In the long run, seaborne iron ore trade is likely to undergo steady diversification as demand grows in other developing regions. On the supply side, traditional suppliers may need to weigh future investment to sustain production in the face of grade decline and resource depletion.
