Overnight, Latin America's Geopolitical Landscape Has Shifted!

On January 3rd, the U.S. military's "lightning arrest" of Venezuelan President Maduro not only shocked the global political arena but also quickly sent ripples through the commodity markets. As the world's eighth-largest holder of iron ore reserves, why would Venezuela's sudden change of circumstances affect China's ferrous metal market? Will Chinese companies' deep involvement there be impacted? And what changes will iron ore and steel prices face? This article breaks it all down for you at once.

I. The Full Picture of the Event: A Long-Premeditated "Lightning Arrest"

This "lightning strike" was no accident. A review of the timeline reveals that the U.S. began its groundwork over six months ago, gradually tightening the encirclement and finally completing the loop on January 3rd.

1. Pre-emptive Deployment – Over Six Months of Encirclement and Infiltration

As early as August 2025, the CIA had covertly infiltrated Venezuela to gather intelligence. Over the following six months, the U.S. actions were continuous:

• August: Offered a $50 million bounty for Maduro's capture and deployed an amphibious fleet in the Caribbean.

• September: Attacked Venezuelan drug trafficking vessels under the pretext of "anti-narcotics" operations.

• November: Launched the "Southern Spear" military operation, dispatching the USS Ford carrier strike group to the region.

• December: Imposed a comprehensive blockade on sanctioned oil tankers, designated the Maduro government as a "foreign terrorist organization," and repeatedly violated airspace and seized oil tankers.

During this period, Venezuela also mounted counterattacks, initiating the "Independence 200 Plan" to deploy defensive forces and signing the "Comprehensive Defense Command Law" to establish an integrated defense command, but these efforts failed to halt the final U.S. action. On December 30, 2025, Trump reportedly called Maduro, demanding his resignation in exchange for his family's safety. Following Maduro's refusal, Trump's resolve for military action was further hardened.

2. The Day of the Operation – A "Lightning Arrest" Completed in 3 Hours

According to details disclosed by Trump, the operation was originally planned for four days earlier but was postponed due to weather. Around 2:00 AM local time on January 3rd in Caracas, several loud explosions were heard overhead. Colombian President Petro was the first to issue a warning on social media: "Venezuela is under missile bombardment." Within just three hours, the situation escalated dramatically, with key moments unfolding clearly:

• Approx. 2:00 AM, Jan 3 (Venezuela Time): Explosions heard in Caracas; Colombian President issues emergency warning of "missile bombardment."

• 4:21 AM EST: Trump officially announces "capture of Maduro and his wife."

• Around 6:00 AM EST: Venezuelan Vice President speaks out, stating Maduro's whereabouts are unknown and demanding proof he is alive.

• 7:25 AM EST: U.S. Attorney General announces Maduro will be tried in the United States.

Notably, during the operation, to breach Maduro's "fortress-like" hideout, U.S. forces forcibly broke through specially reinforced steel doors. A substantial air contingent, including helicopters and fighter jets, was deployed. While there were personnel injuries and one helicopter was severely damaged, all aircraft reportedly returned successfully. Trump revealed that he, along with several senior military officials, watched the entire operation unfold in real-time from a dedicated room at Mar-a-Lago.

II. Venezuela's Ferrous Metal Resource Endowment

The Venezuelan government has stated outright that a core objective of the U.S. action is to "seize oil and mineral resources." Among its rich mineral wealth, ferrous metals (with iron ore at the core) rank among the world's foremost in terms of reserves and quality—this is the critical link to the domestic Chinese market.

1. Substantial Reserves: The World's 8th Largest Iron Ore Reserve Holder

Data indicates Venezuela's total iron ore reserves reach 14.678 billion tons, with proven mineral reserves of 3.644 billion tons (iron grade >55%), ranking eighth globally in iron metal reserves. These deposits are concentrated mainly in the Imataca Iron Belt in Bolívar State and are all "high-quality ore"—with an average grade above 55%, low levels of harmful impurities like sulfur and phosphorus, and are surface-exposed, resulting in mining costs significantly below the global average.

The core production areas are around Piar and Ciudad Guayana in Bolívar State. The five mines surrounding Piar alone account for 64% of the nation's proven reserves. Venezuela's largest state-owned iron ore producer, Ferrominera Orinoco (FMO), is based here, operating three open-pit mines with an annual output of 25 million tons of iron ore. Its products supply domestic steel enterprises and are also exported in large quantities to China and Europe.

2. Industry Structure: The Mining and Export Chain with Deep Chinese Involvement

In recent years, to reduce reliance on oil exports, the Venezuelan government has vigorously promoted economic diversification, with mining as a core growth area. Chinese enterprises play a significant role in its iron ore industry.

Since 2011, China Railway Tenth Bureau Group (CRTG-10) has signed multiple mining contracts with FMO and has also undertaken supporting projects like railway line upgrades for ore transport and the expansion of Palua Port, forming an integrated "mining-transportation-export" chain.

Chinese technology and capital have directly fueled a boom in Venezuela's iron ore exports. With CRTG-10's assistance, Palua Port's shipping capacity surged from 3.5 million tons/year to 7.2 million tons/year. Data shows that CRTG-10's involved projects have historically accounted for over one-third of Venezuela's total iron ore production, with cumulative mining of over 14.64 million tons of high-grade ore. This directly contributed to a 33% year-on-year surge in Venezuela's non-oil exports in 2017, with iron ore becoming a leading export.

Furthermore, the China Development Bank has conducted research for potential large-scale loans, and Wuhan Iron and Steel Group has reached procurement agreements, indicating that Sino-Venezuelan cooperation in ferrous metals is deeply intertwined.

III. Multi-dimensional Transmission to China's Domestic Ferrous Metals Market

Following the sudden change in Venezuela, market volatility quickly transmitted to China. Overall, the impact can be summarized as "primarily short-term sentiment-driven, with limited long-term supply-demand effects, though localized risks require vigilance." Specifically, it unfolds across three core dimensions:

1. Iron Ore Supply: Limited Short-term Import Disruption, Pressure on High-Grade Supply Supplement

First, the direct impact is not significant! China's iron ore imports from Venezuela have been gradually declining. Currently, imports are heavily reliant on Australia and Brazil, which together accounted for 82.2% of imports in 2024, indicating a relatively stable supply system. Moreover, China is advancing its domestic "Cornerstone Plan," continuously releasing capacity from high-quality domestic mines, further enhancing supply resilience.

However, short-term pressures persist. Venezuela's high-grade iron ore (average grade 63.51%) is a scarce resource globally. The incident has caused temporary stoppages at its core mines and ports, exacerbating tight global supply of high-grade ore. Some Chinese steel mills producing high-end steel products may face costs associated with adjusting import channels.

More critically, Chinese company projects on-site have been temporarily halted. If the turmoil persists, prior investments could face losses.

Longer-term, if the U.S. gains comprehensive control over Venezuela's mineral resources and facilitates capacity expansion, the potential restructuring of the global high-grade iron ore supply landscape could indirectly benefit the Chinese market. Trump has explicitly stated intentions to involve U.S. companies in repairing Venezuelan infrastructure, with iron ore mining likely included in any "reconstruction plan." If Venezuela's iron ore production capacity (historically 25 million tons/year) is increased, it could ease global tightness for high-grade ore. Chinese steel mills might then gain more diversified import options for high-grade resources, reducing reliance on single-source countries.

However, it's important to note that U.S.-led resource development might prioritize its alliance system. Whether Chinese companies can re-engage in local projects and secure stable import channels will depend on subsequent geopolitical developments.

2. Steel Industry: Moderate Cost Transmission, Slight Disturbance to Demand Expectations

Venezuela's domestic crude steel production is only about 5.2 million tons annually, having virtually no direct impact on China's supply. Two indirect effects warrant attention:

• Cost Transmission: Potential short-term rises in international iron ore prices could increase costs for steel mills. However, as of December 2025, China's port iron ore inventory stood at a high of 159 million tons, and most mills secure prices through long-term contracts, which would significantly constrain cost pass-through.

• Export Pressure: Geopolitical conflicts increase uncertainty in global economic recovery, potentially leading to more cautious steel demand expectations in affected regions like Europe, which could impact China's export orders. Counterbalancing this, domestic pro-growth policies for real estate and infrastructure provide core support, offsetting some external pressure.

Overall, China's steel market exhibits strong anti-risk capabilities. The "Red-Yellow-Blue" supply-demand early warning mechanism for iron ore established by relevant authorities can promptly monitor emerging issues, strengthen spot and futures market supervision, and curb irrational speculation.

3. Futures Market: Sentiment-Driven Short-Term Volatility, Regulatory Controls Stabilize Expectations

Ferrous futures are sensitive to geopolitical risks. This event has already triggered short-term sentiment-driven fluctuations, with potential for overseas giants to exploit options to amplify price swings. However, it's crucial to understand: China's iron ore futures are anchored to RMB-denominated port spot prices, reflecting real domestic supply and demand. Furthermore, regulators possess rapid response mechanisms to resolutely curb unreasonable price hikes.

For investors, vigilance against sentiment-driven volatility is key, focusing instead on domestic fundamentals like inventory and capacity. Industrial clients can actively use futures tools for hedging to mitigate risks.

IV. Focus on Three Core Variables

In summary, the shock to China's ferrous metals market from this geopolitical contest is primarily "short-term sentiment-driven, with limited long-term impact." Going forward, close attention should be paid to three core variables, which are also critical for corporate and investor decision-making:

1. The Progress of Disposition for Chinese Projects in Venezuela: Whether projects can proceed orderly or exit safely through negotiation to minimize losses on prior investments.

2. U.S. Control Policies for Venezuela's Mining Sector: Whether resource export channels will be opened and if Chinese enterprises can gain fair opportunities for participation and procurement.

3. The Effectiveness of Domestic Resource Security Policy Implementation: The pace of advancement for projects under initiatives like the "Cornerstone Plan" aimed at increasing domestic mine reserves and production, and their ability to further enhance supply chain resilience.

What we must do is distinguish between sentiment-driven fluctuations and fundamental changes, focusing on core domestic drivers like the recovery of steel demand and the release of domestic mining capacity, avoiding blind herd-following speculation.

The disturbance brought by this "lightning strike" is just beginning. However, for China's domestic ferrous metals market, within the risk also lies the opportunity to optimize the supply chain. Short-term volatility is not terrifying. Building a diversified, highly resilient resource security system is the true long-term solution.