Sawt Falasteen - Cheap Chinese steel threatens jobs in Latin America

Last year, the region imported a record 10 million tons of Chinese steel -- a 44 percent 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 import tariffs.

If they were to do so, they would follow Mexico and the United States, which have imposed additional tariffs of 25 percent 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 exportation.

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

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

- 'Existence of dumping' -

In Latin America, some 1.4 million people work in the steel industry.

But their livelihoods have increasingly come under fire as Chinese steel now sells as much as 40 percent cheaper than it could viably be produced on home soil.

One casualty is the Huachipato steel plant, Chile's biggest, some 500 kilometers (310 miles) 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 percent 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 percent.

"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 percent last year as production dropped by 6.5 percent, according to the Brazil Steel Institute.

Gerdau, one of the country's largest steel producers, has laid off 700 workers due to 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 import tariff to 25 percent from a base that varies from product to product.

E.AbuRizq--SF-PST