In response to the massive influx of cheap steel from China into the Brazilian market, the Brazilian government introduced a tariff rate quota system starting in June, raising the tariffs on certain steel products from 9% to 12.6% to 25% in order to prevent the predatory pricing of imported steel. However, two months later, the volume of steel imports in Brazil continues to increase significantly.
According to Bloomberg on Thursday (August 22), data from the Brazilian industry association Aco Brasil showed that alloy imports in Brazil in July increased by 38.3% compared to the previous month. The steel imports in the first seven months of 2024 reached a high of 3.3 million tons, a 23.7% increase from the same period last year, building on the record high set last year. The steel imports last year reached 5 million tons, with China accounting for over half of the total, about 2.7 million tons.
According to the Nikkei News, China has long seen Central and South America as an ideal export destination for its excess steel production capacity. According to the Chinese General Administration of Customs, steel exports to Brazil from China increased by 80% in 2023 compared to 2022, and tripled compared to 2019 before the outbreak of the COVID-19 pandemic.
As the new tariff rate quota system stipulates higher tariffs only on 11 specific products and imposes duties only on the excess beyond the quota, whether Brazil can curb the influx of cheap steel in the second half of the year remains unknown.
Marco Lopes, the head of Aco Brasil, expressed concerns in an interview, stating, “We are worried about the effectiveness of the protection system. We have set up a war room for monitoring, and it seems to be working so far. But we need more time to determine if the quotas are properly adjusted.”
Brazil is one of the world’s largest exporters of iron ore, which is a primary raw material for steel production, making the surge in steel imports a major concern for the Brazilian government.
The Brazilian Ministry of Development, Industry, Trade, and Services plans to conduct an 18-month investigation, with officials stating, “There is enough evidence to show that China’s exports to Brazil involve dumping… This behavior has caused damage to domestic industries.”
Brazil is not the only emerging market expressing concerns over the sharp increase in Chinese industrial products. The Thai government has also accused Chinese companies of evading anti-dumping duties. Industry groups in Thailand have warned that the influx of cheap steel in the market will cause significant losses. The Vietnamese government has initiated an investigation into dumping practices from China following complaints from local industries, targeting wind turbines and certain steel products.