China's second largest steelmaker says it has secured two letters of credit (L/Cs) to purchase iron ore from Brazil's Vale in a 200 million yuan contract denominated in the Chinese currency.

The deal is seen as progress for China as it seeks to promote the use of its own currency as an alternative to the US dollar in international trade.

L/C sourcing

Hebei Iron and Steel Group (HBIS) has secured one of its L/Cs from a Hong Kong bank and the other from a financial institution on mainland China.

The steelmaker says it is negotiating with other suppliers to settle transactions in yuan.

Landmark deal

Vale signed its first deal to sell iron ore in yuan last November to supply China's Yongfeng Group in a spot transaction using the Dalian Commodity Exchange iron ore price.

This deal was seen as a landmark in China's bid to play a more active role in determining global steel prices.

Vale meanwhile became the first international miner to use a Chinese mainland iron ore futures price in a spot physical trade.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.