The bottom is in. Venezuela restarts iron mine after 18 years

orinoco-mining-iron-ore-venuzuela-vintage-600The spot price of iron ore fell further into uncharted territory on Wednesday with the steelmaking raw material declining to the lowest since the inception of the spot pricing system amid a widening supply glut and fresh fears about demand from top consumer China.

The 62% Fe import price including freight and insurance at the Chinese port of Tianjin lost $0.80 or 1.4% to $57.70 a tonne on Wednesday. After almost halving in 2014, the price of iron ore is now down more than 23% this year.

Wednesday's peg was the lowest price since November 2008 when The SteelIndex, a unit of Platts, first started tracking the spot price. In 2008, the benchmark contract price was $60.80 a tonne, which was hiked from the annually-set price in 2007 of $36.63.

Platts News reports Venezuela's sole iron ore producer, CVG Ferrominera Orinoco, has reactivated its Cerro Bolivar mine mothballed in 1997 (at the time iron ore went for $13.04 a tonne).

Entering the market as such a time may appear foolhardy, but these are desperate times in the South American nation which have been hardest hit of the world's oil producers amid the slump in the price of crude. Rampant inflation, food and basic goods shortages combined with crime and corruption have some predicting a complete economic collapse.

Cerro Bolivar is a rich mine and still has reserves of around 18 billion tonnes of ore, the bulk of which is high-grade 64.4% Fe content which still trades above $60 a tonne today. The mine life is another 30 years and total capacity is four million tonnes a year.

Cerro Bolivar is just one piece of owners FMO's expansion plans. The company is lifting annual iron ore production capacity at its four mines by as much as 60% to 40 million tonnes within four years.

Cerro Bolivar began operations in the 1950s under US Steel but was nationalized in 1975 and put on care and maintenance two years later. Former president Hugo Chavez invited the Swiss company Commodities and Minerals Ltd. to run the project in 2009, but no deal was struck according to Platts.

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Images from the Orinoco Mining Company in Venezuela circa 1952 by Gone-Walkabout