By AFP and Alicia Gutiérrez | 2024-04-16

SANTIAGO -- Latin American metalworkers are clamoring for higher tariffs as cheap Chinese steel floods the region, threatening hundreds of thousands of jobs linked to the industry.

Last year, the region imported a record 10 million tons of Chinese steel -- a 44% rise from the year before, according to data from the Latin American Steel Association (Alacero).

Two decades ago, the figure was just 85,000 tons.

"China is too present in Latin America," Alacero executive Alejandro Wagner told AFP.

"No one is against trade between countries, but it must be fair trade," he added.

As the pressure increases, steel plant bosses and workers in countries like Chile and Brazil -- the top producer in the region and number nine in the world -- are pressing governments for higher tariffs.

If they were to do so, they would follow Mexico and the United States, which have imposed additional tariffs of 25% on Chinese imports amid a surge of cheap exports as a result of Beijing subsidies and excess production.

Earlier this month, US Treasury Secretary Janet Yellen expressed concern about "substantial overinvestment and excess capacity" in sectors like steel and aluminum in China, which she said had "decimated industries across the world and in the United States."

A dive in the Asian giant's construction sector has further added to an oversupply of steel for export.

Data from the Economic Commission for Latin America and the Caribbean in 2022 showed China leading global steel production with 54%, followed by India with 6.6%.

Latin America's top producers -- Brazil, Mexico, Argentina and Colombia -- came in at a combined 3.1%.

'Existence of dumping'

Some 1.4 million Latin Americans work in the steel industry.

But their livelihoods have increasingly come under fire as Chinese steel now sells as much as 40% cheaper than domestic steel does.

One casualty is the Huachipato steel plant, Chile's biggest, some 500km south of Santiago.

It has announced it is winding down operations, threatening about 2,700 direct and 20,000 indirect jobs.

"Closing Huachipato would be like an atomic bomb" hitting the region, worker Carlos Ramirez told AFP.

"What we are experiencing is very painful," the 56-year-old said, warning of a looming "social earthquake" for the port city of Talcahuano that has lived mainly from steel for 70 years.

Since 2009, Huachipato has incurred losses of more than $1 billion.

In a last-ditch effort to stay afloat, the company has asked Chile's CNDP price-distortion commission to recommend the government impose a 25% tariff on imported steel.

The commission in a recent ruling found "sufficient evidence to support the existence of dumping" -- the selling of Chinese steel below cost -- and recommended a levy of 15%.

"We are not asking for subsidies or bailouts. Huachipato can be profitable in a competitive environment," its manager, Jean-Paul Saure, said in a press statement.

Huachipato specializes in key inputs for the mining industry, including steel bars and balls used in the milling of copper -- of which Chile is the world's largest producer.

During the COVID-19 pandemic, when world trade was interrupted, "it was Huachipato that kept the country's steel supply" afloat, Economy Minister Nicolas Grau told AFP.

The government, however, has its hands tied: Chile signed a free trade agreement with China in 2006 and risks punitive measures if it opts for a tariff to protect its steel industry against dumping.

In Brazil, steel imports from China rose 50% last year as production dropped by 6.5%, according to the Brazil Steel Institute.

Gerdau, one of the country's largest steel producers, has laid off 700 workers because of the "challenging scenario faced by the Brazilian market in the face of predatory import conditions of Chinese steel," the company said.

Like in Chile, the Brazilian steel industry is demanding the government increase the tariff to 25% from a base that varies from product to product.

Safety concerns

Amidst the steel crisis, renewed concerns have arisen regarding irregularities in Chinese steel, potentially affecting the Chilean construction industry.

Manuel Lemungher, a Chilean engineer and construction safety and quality specialist, shared his concerns with Entorno regarding the influx of low-quality and uncertified Chinese steel into Chile.

"This situation is deeply concerning, particularly in a seismic country like Chile, where the quality and certification of steel are paramount to ensure the safety of buildings," he stated.

Chile could potentially serve as the epicenter of this crisis in the region, he warned.

"The inundation of the Latin American market with Chinese steel poses a significant and immediate threat to the regional steel industry. It is imperative to address this challenge collectively, pursuing solutions that safeguard the interests and security of our citizens and local industries," he emphasized.

Rodrigo Silva, a professor of metallurgy at the University of Concepción, underscored to the local newspaper La Estrella the critical necessity of mandating certification for steel entering Chile. Given the country's seismic activity, specialized construction standards are imperative for ensuring safety.

"The Chilean standard delineates the requirements that steel destined for general-purpose structures and for [structures] subjected to seismic loads must meet," he elucidated.

"Chinese engineers and manufacturers may lack familiarity with our regulations and practices, which have proven effective in withstanding severe earthquakes. Additionally, remotely validating the entire design and manufacturing process in compliance with national standards poses significant challenges," stated Silva.

Alacero warns of an "imminent risk" to the steel industry in the region, projecting a 2024 rife with uncertainties and downward trends due to unfair competition from China.