Mining giant Rio Tinto wins yuan contract with China

The Rio Tinto Group, the UK-Australian giant in the global mining industry, has signed its first yuan-denominated purchase contract as China seeks to internationalize its currency and move more Chinese steel overseas.

Rio has agreed to purchase 170,000 tonnes of SP10 iron ore from Shanxi Gaoyi Steel, Shanghai Securities News reported today. The report says that the port of Rizhao in Shandong province is being used for the ore.

According to Wang Yangwen, a global analyst at Standard & Poor's Financial Services, a global analyst at Standard & Poor's believes the move is likely to be a test for the buyer as he only buys SP10 products and not its main powder and blocks PB

Rio Tinto is the third company to buy iron ore under yuan-based contracts, added Wang Guoqing, director of the Lange Steel Information Research Center. Brazilian Vale has regularly entered into RMB deals since 2017, and another Australian firm, Fortescue Metals, struck its first RMB deal in June this year.

China is the world's largest consumer and importer of iron ore. In 2018, he brought in billion tons, and from Australia - 724 million.

“RMB pricing reduces the risk of foreign exchange settlement for Chinese companies,” Wang said, adding that it “cuts losses caused by exchange rate fluctuations and lowers the cost of transactions in which the US dollar is used as an intermediary.”

Wang Yangwen agreed, saying that the contracts help Chinese firms that do not do dollar deals as prices are closer to those in the local market.

Meanwhile, Rio Tinto said it found a potentially large source of lithium for electric vehicle batteries while searching for gold in California waste heaps, calling it a "eureka moment" for the company, the Financial Times reported.

The London-based mining company said it could become the largest producer of lithium for batteries in the United States if it can successfully process the rock on a larger scale.

The discovery could pave the way for the Rio to enter the lithium market, which will skyrocket over the next ten years thanks to the rise in the number of electric vehicles powered by lithium-ion batteries, the report said.

Lithium is currently produced in South America and Australia and is controlled by five manufacturers, two of whom are Chinese. But President Donald Trump's administration is keen to encourage domestic supply to meet the needs of its automakers.