The agreement between China Mineral Resources Group, or CMRG, and Kumba Iron Ore took effect on April 1 and will run for one year, Bloomberg reported, citing people familiar with the arrangement.
Kumba had previously confirmed reaching an agreement with CMRG but did not disclose its duration, pricing formula or contracted volumes.
The South African producer said during its July interim-results call that the arrangement covered existing long-term contracts with Chinese steelmakers represented by CMRG.
Only a small portion of Kumba’s overall sales to China is covered, according to the company. The remaining cargoes continue to be sold through existing long-term customer relationships and the spot market.
China accounted for approximately 53% of Kumba’s export sales during the first half of 2026, making it the company’s largest market.
The agreement covers iron ore produced at Kumba’s Sishen and Kolomela mines in South Africa’s Northern Cape. Anglo American owns 69.7% of Kumba, Africa’s largest iron ore producer.
China strengthens its grip on iron ore purchasing
CMRG was established by Beijing in 2022 to consolidate purchases for China’s steel industry and strengthen the country’s bargaining power against the major global mining companies.
China produces more than half of the world’s steel and consumes about 75% of the iron ore traded by sea, but miners have historically held considerable influence over contract terms and benchmark prices.
The country’s fragmented steel industry previously allowed producers and mills to negotiate separately with miners, weakening China’s collective purchasing power despite its dominant share of global demand.
CMRG is attempting to change that by negotiating on behalf of steelmakers, directing purchases through a central system and promoting pricing benchmarks that more closely reflect transactions inside China.
Industry estimates suggest the state buyer now handles more than 60% of China’s iron ore imports.
CMRG has also asked some Chinese commodity traders to purchase cargoes through its online platform. Increasing trading volumes on the platform would give the organisation greater visibility into prices and more influence over physical transactions.
Its approach has already led to disputes with the world’s largest iron ore suppliers.
China imposed restrictions on purchases of some BHP cargoes during a months-long disagreement over pricing and supply terms. Those restrictions were gradually lifted after BHP reached an agreement with CMRG in April.
The state buyer has also restricted purchases of some products from Australia’s Fortescue and directed certain steelmakers to pause supply negotiations with Rio Tinto.
By reaching an agreement with CMRG without a prolonged public dispute, Kumba has secured access to its most important export market as China intensifies pressure on larger Australian producers.
South Africa’s premium ore gives Kumba an advantage
Kumba’s negotiating position is supported by the quality of the ore produced at Sishen and Kolomela.
Its products have an average iron content of about 64% and low levels of impurities. Higher-grade ore allows steelmakers to produce more steel with less waste and lower emissions than they would using lower-grade material.
That quality has enabled Kumba to sell at a premium to standard benchmark prices.
The company received an average export price of $90 per wet metric tonne during the first half of 2026, approximately 8% above the comparable benchmark.
Kumba generated approximately $660 million (R10.9 billion) in earnings before interest, tax, depreciation and amortisation during the six months, with an EBITDA margin of 35%.
It expects to produce between 31 million and 33 million tonnes of iron ore in 2026 and sell between 35 million and 37 million tonnes, including cargoes drawn from existing stockpiles.
Performance remains dependent on Transnet, South Africa’s state-owned freight rail and ports operator. Years of derailments, equipment shortages, cable theft and maintenance problems have restricted the amount of ore Kumba can move from the Northern Cape to the Saldanha Bay export terminal.
Although rail performance has shown signs of improvement, Kumba continues to carry large mine stockpiles and has made its production and sales forecasts conditional on Transnet’s performance.
African supply becomes more important to China
The deal comes as China seeks to diversify iron ore supplies beyond Australia and Brazil.
Rio Tinto, BHP, Fortescue and Brazil’s Vale continue to dominate seaborne trade, but their combined share of China’s imports has fallen to its lowest level in about a decade.
African projects are central to Beijing’s diversification strategy.
China has invested heavily in Guinea’s Simandou development, one of the world’s largest untapped high-grade iron ore deposits. Exports from the project are expected to increase competition in the seaborne market and reduce China’s dependence on Australian miners.
Simandou will primarily supply high-grade iron ore fines, while Kumba produces a significant proportion of lump ore. Lump can be fed directly into blast furnaces without the additional processing required for fines, giving the South African product a different position in the market.
For South Africa, the CMRG agreement provides some certainty for exports from an industry constrained by domestic logistics problems and weaker global steel demand.
However, it also deepens Kumba’s exposure to a purchasing system designed explicitly to transfer pricing influence from miners to China.
The immediate deal covers only a small part of Kumba’s Chinese sales. Its wider importance lies in bringing Africa’s largest iron ore producer into the state-controlled procurement structure Beijing is using to reshape the $132 billion seaborne market.
