The first-ever iron ore trade using blockchain technology has been a success. The deal of around $14 million was completed between BHP and Baowu Steel Group Co. Ltd’s state-owned listed arm Baoshan Iron & Steel Co. Ltd.

BHP Group sales and marketing officer Michiel Hovers mentioned earlier, “The bulk commodity industry needs a digital revolution to reduce physical documentation processes.” True to his words, this successful shift towards digitalisation marks a revolution in an industry that is traditionally dependent on a legacy system of paper documentation.

The blockchain platform where the transaction was carried out has been created by a start-up and privately-owned company based in Canada, namely, MineHub Technologies. The deal which took place in June saw the MineHub platform processing terms of the contract, exchanging digital documents online and providing real-time visibility and accountability of the cargo along the entire supply chain.

Arnoud Star Busmann, Chief Executive Officer at MineHub Technologies said, “Current pandemic events and fraud cases in the commodity trading industry are causing a step-change in the adoption of digital solutions.”

According to MineHub Technologies, this deal between BHP and Baoshan marks the first of many transactions that are to be expected in future involving other varied industry partners on its blockchain platform.

Melbourne-based multinational BHP Group being the world’s biggest mining conglomerate as per market capitalisation, this is indeed a revolutionary step towards the future of the mining industry.

For Baowu Steel Group Co. Ltd, however, this is not their first venture into the blockchain. They were the pioneers in completing what is claimed as the “First yuan-denominated international letter of credit (LC)”. Standard Chartered issued this first blockchain-based LC in May, over the financial blockchain trade network Contour.

LCs are a crucial part of international commodity trading. It acts as a kind of guarantee for the seller that they will receive the payment for their goods once delivered. Using blockchain to issue LCs are a clever move seeing how it solves issues with fraud, transparency and reliability. Not to mention the time and cost benefits of moving away from paper-based LC transactions.

Chief Executive Officer of Contour Carl Wegner said, “The opportunity cost in trade finance is huge. Trillions of dollars in commodities, products and services are transacted daily, but the sector is still characterized by slow, duplicative and expensive processes.”

Blockchain technology can effectively streamline the processes making it more cost-effective, faster and more resilient. Recently Vietnamese HD Bank has also signed up for a membership with Contour, noting how blockchain is the technology of the future.

Sources: Reuters, CoinDesk

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About the author

Srimayee Sen Sarma

Contributing Author

Srimayee has over 10 years of experience in creating content. Driven by her passion for writing, She has had her articles published with a byline in newspapers, magazines, blogs, and websites. Her other passions include reading, gardening and traveling.