"Petro-Yuan"? "Iron Ore Yuan"? RMB Internationalization Is Advancing "Pragmatically"

From the Simandou iron ore project to BHP's pricing agreement, the presence of the RMB in the commodities market is becoming increasingly tangible.

As conflicts in the Middle East persist, the choice of settlement currency for commodities has once again become a market focus. Following the Russia-Ukraine conflict, geopolitical risks associated with USD payment infrastructure have been further amplified. Consequently, the use of the RMB in transactions involving commodities such as oil and iron ore has heated up, reigniting discussions about the "Petro-Yuan" and "Iron Ore Yuan."

In its latest research report released on August 3, J.P. Morgan systematically reviewed the expanding role of the RMB in the commodities market. The report concludes: The progress is real, but the analogy of a "Petro-Yuan" may be inappropriate.

Let the data speak first. According to data from the People's Bank of China, the proportion of RMB settlement in China's goods trade reached 29% in 2025, hitting an ATH (All-Time High) and surpassing the previous peak in 2015.

From Settlement to Pricing: Iron Ore Is a More Realistic Breakthrough Point

Analysts believe that in the commodities sector, the "Iron Ore Yuan" is more feasible in the near term than the "Petro-Yuan."

The reason is straightforward: Oil market pricing remains anchored to the USD, whereas the iron ore market is more closely tied to Chinese buying power, industrial demand, and state procurement.

In 2023, China and the United Arab Emirates completed the first liquefied natural gas transaction settled entirely in RMB. In the iron ore sector, progress has been more concrete—reportedly, BHP reached an agreement with China Mineral Resources Group (CMRG) whereby some iron ore sales will be priced based on a basket of four benchmarks, including two RMB-denominated indices.

Analysts believe the significance of such agreements lies not in immediately challenging the dominance of the USD, but in "embedding RMB-linked price references into global key commodity markets."

Meanwhile, Vale has incorporated Dalian Commodity Exchange (DCE) iron ore futures into some of its pricing and hedging arrangements. As China is the largest end consumer of iron ore, this reality is driving increased market relevance for Chinese benchmarks.

Simandou: A Key Development

To understand the commodities logic behind RMB internationalization, Simandou serves as a specific entry point.

In early 2026, China Baowu Steel Group obtained operational control of the Simandou iron ore project in Guinea. This is one of the largest known undeveloped iron ore resources globally.

This is not an isolated event. According to J.P. Morgan data, by 2024, the cumulative scale of China's overseas direct investment (ODI) related to commodities was approximately $270 billion, with an average annual growth rate of about 14% over the past decade.

More importantly, there has been a shift in investment logic. In the early stages, Chinese companies primarily held minority equity stakes to secure resource supplies. In recent years, the strategy has shifted towards seeking operational control, board seats, and direct management rights.

J.P. Morgan's report notes that this shift is directly related to RMB internationalization: "If Chinese enterprises have greater influence over supply, financing, and long-term contracts, it becomes easier to embed RMB pricing and invoice settlement into transaction structures."

In other words, currency influence is built from the upstream.

Infrastructure: CIPS, Swap Agreements, and Futures Markets

Supporting RMB commodity settlement is a forming infrastructure system.

At the payment level, the daily trading volume and number of transactions of the Cross-Border Interbank Payment System (CIPS) continue to grow; the network of RMB swap agreements established by the People's Bank of China is expanding; and the offshore RMB (CNH) deposit pool has grown by nearly 60% since the pandemic.

At the financial market level, the Shanghai International Energy Exchange (INE) launched RMB-denominated crude oil futures in March 2018. Since then, Dalian iron ore futures, INE copper futures, and others have been opened to overseas investors. Currently, regulatory authorities have designated 38 commodity derivative contracts as "domestic special varieties," allowing overseas institutions to participate more directly.

However, J.P. Morgan also pointed out that Chinese commodity futures markets still lag significantly behind Brent, WTI, and LME benchmarks in terms of liquidity and global pricing influence.

Not Replacement, But Expansion of Share

J.P. Morgan's report sets clear boundaries for the "Petro-Yuan" narrative.

The report states: "The most likely outcome is not a successor to the USD, but rather the RMB playing a larger role in a more fragmented and multipolar system."

The constraints are structural. The USD currently accounts for 89% of global foreign exchange transactions, 82% of trade finance, 57% of foreign exchange reserves, and 40%-50% of global trade invoicing.

J.P. Morgan lists three core constraints:

First, pricing is much harder than settlement. A shipment of goods can be priced against a USD benchmark and then settled in RMB at an agreed exchange rate. This reduces USD payment exposure but does not truly establish an RMB benchmark, nor does it eliminate USD exchange rate risk. Pricing requires deep futures markets, broad participation from producers and consumers, credible delivery mechanisms, and mature hedging tools.

Second, de-risking seeks diversification, not a bet on the RMB. Most countries are not looking to replace USD dependence with RMB dependence, but rather seek more local currency settlement, regional payment arrangements, and bilateral netting. The RMB is one of the beneficiaries, but not the only one.

Third, USD advantages stem from its ecosystem, not just a single pricing convention. Capital market depth, the scale of trade finance, the breadth of hedging tools, and the supply of safe assets collectively constitute the USD's moat. The RMB remains constrained by capital controls and exchange rate management, and foreign investment still faces concerns regarding policy predictability, liquidity, and repatriation of funds.

J.P. Morgan's report summarizes that the opportunity for the RMB lies in "gaining a larger share in trade and financial transactions where China is a key buyer, financier, investor, or infrastructure provider," rather than fully replacing the USD.

From official statements, this direction aligns with policy goals. The proposals for the 15th Five-Year Plan explicitly state the aim to "promote RMB internationalization, enhance the level of capital account openness, and build an autonomous and controllable RMB cross-border payment system."

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