By Alicia Gutiérrez | 2024-09-12

SANTIAGO -- The Chilean steel industry faced an unexpected setback on September 9 when the Chilean Anti-Distortion Commission announced its dismissal of claims of Chinese "dumping" of cheap steel.

The ruling concludes the investigation launched last November into alleged dumping of imported steel balls from China, leaving one of Chile's key industrial sectors vulnerable to unfair competition.

The September 9 edition of the Official Gazette of the Republic of Chile confirmed that the commission members unanimously agreed there was insufficient evidence to prove "damage or threat of damage to the domestic industry" caused by imports of steel.

The investigation followed numerous complaints and protests from workers in the industry, particularly at the iconic Huachipato steel plant, which announced a halt in operations in March and confirmed its permanent closure just weeks ago, citing unfair competition from Chinese imports.

Despite the evidence provided by a leading Chilean steel company, the Commission opted to lift temporary tariffs previously imposed on steel imports from China.

In March, the Chilean Anti-Distortion Commission imposed tariffs of 15.3% on steel balls and 15.1% on steel bars.

Following a wave of protests and strikes over unfair competition from China, the tariffs increased in April to 24.9% for bars and 33.5% for steel balls.

"This is an utterly disheartening outcome, one we never anticipated. We are at a loss for words to describe what we're going through," said Héctor Medina, president of the Huachipato workers' union, during an interview with University of Concepción Radio on September 10.

During the past 15 years, the steel complex has racked up losses of more than $1.2 billion, said Medina.

Unfair competition

Last November 20, Compañía de Aceros del Pacífico (CAP), a top Chilean steel producer, formally complained to the Anti-Distortion Commission.

In the complaint, CAP accused Chinese companies of selling steel at prices up to 40% below market value, leading to daily losses to CAP of about $1 million.

CAP specifically targeted the import of steel bars used to produce grinding balls for mining, as well as the import of finished steel balls.

The announcement on September 9 follows recent warnings from Chilean legislators that their country has been subjected to political and economic pressure from China.

The decision, which aligns with Chinese interests, delivers a devastating blow to the Huachipato steel plant, which will begin shutting down September 23, ending more than 70 years of operation.

Approximately 22,000 jobs in the Bío Bío region are at risk and the closure will proceed gradually until mid-October, significantly impacting the local economy.

Latin America's uncertainty

Over the past two decades, China has transformed itself from a major importer of steel into the world's leading producer, increasing its global share from 15% in 2000 to 54% in 2023.

The Latin American steel industry is facing significant challenges from the influx of Chinese steel and price distortions.

Like Chile, Colombia has experienced a critical few weeks that could determine the future stability of its steel sector.

Colombian companies like Siderúrgica Paz del Río and Alumina, a multinational aluminum extruder, have urged the Colombian Ministry of Commerce to implement antidumping measures.

In Brazil, local steel producer Gerdau started 2024 by laying off workers at its Pindamonhangaba plant in São Paulo. The company attributed these layoffs to the "challenging conditions in the Brazilian market caused by the predatory impact of Chinese steel imports," according to its statement in late February.

In Peru, the metalworking industry faced a downturn in early 2024, largely attributed to "predatory pricing" resulting from a free trade agreement with China, according to Antonio Castillo, general manager of Peru's National Society of Industries (SNI).

Criticism and protests consistently highlight a key issue: heavily subsidized Chinese steel is cheaper than local steel.

Without robust action from Latin American governments, the influx of Chinese steel will persist, undermining local markets and decimating steel companies, as evidenced by the collapse of Huachipato.