There are not only fireworks on the National Day holiday, but also an agreement. BHP Billiton agreed to use RMB to settle iron ore with China. This is the first time in the history of China-Australia trade and a breakthrough for the RMB to reach the core of commodities.
It may seem like it is just a change of settlement currency, but it affects many nerves in mines, exchange rates, national debt and geopolitics.
Whoever is counting, whoever is shifting, whose plate is passive, can see the point in this decision.
Australian currency, Australian currency.
China is the world's largest buyer of iron ore, with the largest proportion in the shipping market shipped to China.
Australia is China's main supplier. In the export structure, the dependence of iron ore on China is the most intuitive. In the past few years, Australian companies have tasted the sweetness of the Chinese market and felt the pressure of fluctuations.
China has promoted the diversification of import sources, deepened cooperation with several major mining companies in Brazil, the Middle East, and Africa, and used more RMB settlement in newly signed contracts. This action has made Australian mines see risks.
Once the price and shipment rhythm are lost, profit is not only a thin problem, capacity planning will be forced to adjust.
The first is business reason.The dollar interest rate is high, the exchange rate is suddenly down, and the Australian enterprises return to hedge between the dollar and the real currency, and the financial costs are like sand paper.
Settlement in RMB, the cash flow is closer to the place of purchase, and the price negotiation is smoother, at least reducing the irrelevant noise of the US dollar index.
Since the main customers have the advantage of pricing in RMB, it is common sense for suppliers to make settlement arrangements on the customer side.
There are also reality games. The importance of the Chinese market to the Australian economy is very direct, and the volume of bilateral trade once far exceeded Australia's trade with the United States.
When China opens channels to other mineral sources, Australia's best solution is not to take the wind and hold the door handle as soon as possible: settle in RMB, stabilize orders, and then talk about long-term cooperation. For the Australian side, this is not about taking a stand and taking an oath, but about keeping a steel job.
As the largest buyer, settling with its own currency, reducing the interference of exchange rate fluctuations on import costs, can also drive the offshore yuan pool deeper.
The more transactions, the more assets, the better the RMB is used abroad, this is reasonable with the road construction, the first car runs, and the logistics afterwards naturally arises.
Iron ore opens, and the dollar hinterland rises
Commodities have always been the territory of the US dollar, and energy, metals, grain, prices and settlements have been stationed in the US dollar coordinate system for a long time. The significance of settlement of iron ore in RMB lies not in the amount of one ship and one order, but in the fact that it ties RMB and global mineral resources to the same bill.
Resource binding is a chain reaction of payments, financing, and reserves: Banks need supporting clearing, companies need to allocate RMB cash positions, and sovereign institutions are more willing to hedge with some RMB assets.
In the past few years, the scale of cross-border RMB receipts and payments has expanded rapidly, and the ranking of RMB in payments, trade financing, and reserves has risen steadily.
On the surface, it looks like a change in share, but in essence, it is a shift in usage scenarios from scraps to core shelves. The more local currency settlements of oil, gas, minerals, and agricultural products, the less the use of RMB depends on a single policy, but is pulled by the trade chain itself.
Iron minerals are a wind-oriented measure. Steel mills' procurement rolls monthly, financial derivatives stockpiles up price, port inventories and credit quotas are linked, all of which require a fluid people's currency channel.
Once the channel is unblocked, the interest rate curve of the offshore RMB will be more complete, the credit spread pricing will be more detailed, and there will be a natural demand for related bills, factoring, forward and swap instruments. The international status of the currency has never been evaluated in words, but in use.
Another advantage for China is to move its pricing discourse halfway forward.
Even if global prices are multi-faceted, the settlement of the RMB allows Chinese buyers to be less exposed to dollar volatility in negotiations, and cost management is more predictable with long-term contracts and index adjustments.
For the micro-profit and cyclical industry of steel refining, the cost of stabilizing two or three percentage points is equivalent to keeping a round of downward cycle.
Wall Street crumbled, Washington failed
The reason why the United States is unhappy is very simple. The global role of the US dollar brings the advantage of capital cost, and it also turns financial sanctions into a toolbox that can be accessed at any time. When more trade is settled in non-US dollars, the handle of the toolbox becomes a little shorter.
Iron minerals are not geo-sensitive products such as oil and gas, but it is large, long, and frequent, and the RMB stands in this category, like hitting a hammer in the US dollar belly, not necessarily immediately pushing the barrel, but can let the structure start to loosen.
The distribution of foreign investors to U.S. bonds has increased in volatility in recent years, and the reduction of holdings by the main holding countries reflects concerns about U.S. interest rates and fiscal pathways.
The diversification of central banks and sovereign fund allocations will accelerate if more trade is settled in domestic currencies, the natural buyback margin of U.S. bonds will decline marginally, and the inertia of the United States inining high debt and low financing costs will be weakened.
Of course, the dollar’s position does not mean that it falls.The deep markets, the stability of the rule of law and the liquidity of assets in the United States are still attractive in the foreseeable future.
If the RMB wants to go further, it also needs to make up for lessons: financial markets are more open, institutional rules are more transparent, and cross-border capital flows in and out are more predictable.
Only when these homework are done solidly will the RMB in trade steadily move from settlement to pricing, and from pricing to reserve.
Taking the footage back to this Chinese-Australian move, the stimulus to the United States is more of a symbolic significance plus a practical overlap.
Symbolic significance lies in the appearance of head cases of settlement in RMB in the allied system, explaining In the face of commercial interests, political alliances also account for it.
The actual encroachment is that ore, a cornerstone commodity, Once there is a scaled RMB flow, the supporting people's currency financing, insurance and derivatives market will grow muscles, and new inertia is formed.
From an order to a map
A change in paper settlement doesn’t immediately rewrite the world’s currency map, but it’s like adding a new route to the map, from the port straight to the pool of money.
For China, this is a pragmatic step to grasp prices, stabilize costs, and expand RMB usage scenarios; For Australia, this is a rational choice to keep the market and diversify exchange rate risks; For the United States, this is a modest but continuous edge erosion.
The next thing to look at is not the slogan, but the compound interest. Whether the contract can be renewed, whether the number of participants will increase, and whether financial products can keep up all determine whether this route can become a waterway.
As long as there was more boat on the way, the tide naturally changed direction.At that time, the ocean of the dollar was still, but the waves no longer hit only one shore.