On Iron Ore and Drug Lords: Mexico's Continued Battle With the Knights TemplarIn the latest development in an ongoing struggle between Mexican authorities and the Knights Templar drug cartel, Mexican police have stopped a massive amount of ore from being exported from Mexico’s Lazero Cadernas port. MINING.com reported that police took control of a ship carrying 68,000 tonnes of illegally mined ore last Monday following an anonymous tip.

The seizure follows a crackdown in early March during which Mexican authorities took 119,000 tonnes of iron ore in a raid of storage yards near the port. According to Mineweb, the authorities also seized a substantial amount of mining equipment, including conveyers, crushers, backhoes and generators.

As Iron Investing News explained in March, over the past several years the Knights Templar cartel has expanded its activities to the mining and exporting of iron ore. The organization was originally involved in importing methamphetamine-related chemicals from China by working with Chinese shipping companies, but it gradually moved towards coordinating illegal mining operations instead.

Although the crew of Monday’s offending ship, the Jin Hua, showed documentation proving it was allowed to transport its load of iron ore, problems with the documents led to the seizure of the iron ore shipment. MINING.com notes that Fujian Huarong Marine, who owns the ship, now has a month to prove that the ore was legally mined.

For or against the cartel?

Tension ramped up late last month with the appearance of vigilante groups near Arteaga, hometown of one of the four living Knights Templar leaders. Residents of Arteaga are reportedly in favor of iron mines nearby as they have been beneficial for the local economy, The Huffington Post states. Some residents even tried to stop the vigilantes from searching for leader Servando Gomez as he has given financial support to those living in the town in the past.

However, vigilante leader Estanislao Beltran insists that the residents were acting under duress. In another article, the Post notes that many town governments were under significant pressure from the cartel before federal forces and vigilante groups began to bear down on illegal activities in Michoacan. Local governments had to grant large projects to construction companies controlled by the cartel, and were sometimes forced to give the drug lords 10 percent of funds received from the federal government

Though the Mexican government clearly wants to stop the cartel, it would prefer to see the vigilante groups under its own control. It has told them to join its Rural Defense Corps, and has said that the groups must demobilize by May 10.

Corruption runs deep

Interestingly, in Lazaro Cardenas — the same port city where Monday’s iron ore seizure took place — Mayor Arquimides Oseguera was arrested near the end of April on suspicion that he is linked to organized crime. Specifically, the mayor was accused of kidnapping and extortion; his arrest was part of a broader government crackdown aimed at purging Mexico’s Michoacan state of Knights Templar members and allies, according to the LA Times. Unsurprisingly, federal officials said last year that they had known about the cartel’s illegal mining and export activities for quite some time, and were keeping watch on the port, as per CTV News.

Furthermore, The Huffington Post reported on April 17 that another mayor, Uriel Chavez of Apatzingan, was also arrested on suspicions of links to the drug cartel. His arrest came 10 days after Jesus Reyna, former interior secretary of Michoacan state, was placed under house arrest due to evidence of meetings with Knights Templar members.

Those arrests are in line with suspicions that the Knights Templar have an extraordinarily large amount of control within Mexico and abroad. Indeed, it would be difficult to conduct an illegal iron ore mining and smuggling operation of such magnitude without extensive ties to local and state governments.

However, with iron ore prices continuing to fall due to the current surplus, the last thing miners and producers need is more iron ore being pumped into China through the black market. Mexico will no doubt continue its efforts to suppress the activities of the Knights Templar, but the country likely has a long struggle ahead.

In addition to multiple arrests in connection to the Knights Templar cartel, Mexico has seized over 200,000 tonnes of illegal ore headed to China this year.


Securities Disclosure: I, Teresa Matich, hold no investment interest in any companies mentioned. 

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Iron Ore Price Tumbles; Mexico Takes Stand Against Smuggling