BHP Group could face up to $2-billion hit from pricing pressures after China restricted its Jimblebar iron-ore, as discounts widen and lump premiums collapse, according to Goldman Sachs Group.

The restrictions could lead to about $1-billion a year in losses from incremental discounts on the company’s major iron ore fines products at spot prices, analysts led by Matt Greene wrote in a January 27 report. A further $1-billion could be added as impact to revenue from discounts on lump products, with Newman Lump discounts driving an 80% fall in premiums paid on the product.

China implemented the curbs in September as part of the country’s push to gain greater bargaining power with the world’s top iron ore suppliers, arguing that its vast steel industry should secure better terms.

The move, carried out through state-backed China Minerals Resources Group, is changing how prices are set in a market long driven by seaborne benchmarks, the report said. Goldman cautioned its estimates are not a full proxy for realized prices given product mixes, timing lags and contract terms, but said the analysis provides a framework for assessing the pricing dynamics now in play.

A spokesperson for BHP declined to comment. The company said last week it is still negotiating annual contract terms with CMRG.

“Our conversations suggest the ban is expected to extend through Chinese New Year,” the analysts said. “BHP is absorbing a pricing hit now, but maintaining its preferred pricing framework may preserve greater value over the long run.”

Chinese ports have been dealing with elevated Jimblebar inventories since the curbs took effect, while some cargoes are struggling to find buyers and are being diverted to other markets.

The fall in premiums in the lump market has also led to a shift in the pricing of Pilbara Blend Lump produced by Rio Tinto Group, the analysts said, adding that this could present a potential $1.2-billion hit to the company’s revenue as well.

A spokesperson for Rio Tinto declined to comment.