Chile, the last “victim” of Chinese steel that floods Latin America

The Chilean steel company Huachipato, which this Wednesday announced the indefinite suspension of its operations, is the latest “victim” of Chinese steel, which for a few years has been flooding the Latin American region and has forced large producers such as Brazil or Mexico to shield themselves with duty antidumping.

Located in the southern city of Talcahuano, 500 kilometers from Santiago, the main Chilean steel producer made the decision a day after the Anti-Distortion Commission, an independent institution that advises the Chilean Presidency, recommended applying an average tax of 15.3% to three chinese companies who import steel balls.

For the company, which recorded losses of US$ 279 million in the first half of 2023, the figure is “insufficient” and does not solve the distortions that the chinese steelwhich is 40% cheaper than the Chilean, according to their calculations.

China, from importer to exporter

Owned by the CAP group and with more than 70 years of history, the company explained that the closure process will be gradual and will last at least three months.

He Chilean governmentwhich assures that the surcharges proposed by the commission are the highest in decades, promised to “study alternatives” to avoid closure and summoned the steel company to a meeting this Thursday.

“Huachipato is today having to sell at prices that do not allow it to survive,” Álvaro Ananías, president of the Chamber of Production and Commerce of the Biobío region, told EFE and who defined it as the pillar of a “steel ecosystem” that generates nearly 20,000 direct and indirect jobs.

“This ecosystem was functioning reasonably well until Chinawhich did not have a productive steel industry, began to manufacture it and went from being a large importer to a large global exporter”Ananias added.

In the last two decades it has increased its production by 693%, going from producing 15% of the world’s steel in 2000 to 54% in 2023, according to Alacero, the employer’s association that brings together the large Latin American steel companies.

Despite being a relatively small company in the world steel market, with a production of one million tons per year, the situation in Huachipato has raised alarm bells in the region, where some of the steel that the Asian giant cannot place in its warehouse arrives. market due to the slowdown of its economy.

In 2000, China exported 80,500 tons of steel to Latin Americacompared to the 10 million tons per year that it currently sells, which has caused a process of deindustrialization in the region and has led countries to take different trade defense measures.

Of the 66 antidumping resolutions in force in 2022 in the region, 43 were against China, according to Alacero, who estimates the Latin American industry produces 70 million tons per year and generates 1.4 million direct and indirect jobs.

Mexico takes the lead

Brazilthe largest steel producer in Latin America and the ninth in the world, is the one that is suffering the most from the challenge and “last year had a historical record for Chinese steel imports,” stressed the executive director of Alacero, Alejandro Wagner.

The Brazilian Government announced on March 1 the opening of an investigation into alleged unfair competition in imports of carbon steel sheets following a complaint from the Companhia Siderúrgica Nacional (CSN), which alleges that Chinese products have a price of 44% less than usual.

According to the Brazilian Government, the import of these Chinese steel derivatives, which currently has a tariff of 10.8%, has doubled in two years.

Brazil is followed by Mexico, which is taking the measures antidumping toughest in the region to protect its industry so that it can compete on equal terms.

“At the end of last year, Mexico gave an example to Latin America and took a historic measure: raising steel import tariffs to 25%. “If you look at Europe, the tariff is 22% and in the United States it is 25%,” Wagner explained.

In third place, but very far away, is Argentina, which in addition to the threat of chinese steel is suffering a significant drop in demand due to the serious economic situation in the country and the contraction in sectors such as construction or the automotive industry.

In this scenario, at the end of February the Argentine steel company Acindar, controlled by the multinational ArcelorMittal, announced that it will stop production in its five plants for a month due to an abrupt reduction of between 35% and 40% in sales in the last months.