Chinese cheap steel products are flooding into Latin America, posing a threat to the local industries and employment. Latin American countries are following the footsteps of the United States and Europe by imposing tariffs on steel products from China.
In recent weeks, Mexico, Chile, and Brazil have raised import tariffs on Chinese steel products, with some countries doubling the tariffs. It is expected that Colombia will soon follow suit.
According to data from the Latin American Steel Association (Alacero), China exports nearly 10 million tons of steel to Latin America annually, valued at $8.5 billion, far exceeding the 80,500 tons in 2000.
The influx of cheap Chinese steel is threatening the interests of Latin American steel producers and jeopardizing 1.4 million jobs.
Last year, China’s exports to Brazil surged by 62% to reach 2.9 million tons.
Brazil is set to introduce a tariff quota system to prevent predatory pricing on imported alloys. While the official announcement in Brazil did not mention China, insiders revealed that the government’s move aims to stop the Communist authorities from dumping steel products in Brazil.
Marco Polo de Mello Lopes, head of the Brazilian Steel Institute (Aco Brasil), stated, “This is a way of showing the world that Brazil is a country with rules—it is not a no man’s land.”
China’s Ministry of Commerce did not respond to Bloomberg’s request for comment on the recent imposition of tariffs by Latin American countries.
For Brazil, possessing the world’s largest iron ore reserves is not enough to compete with China’s steel mills.
Take the multinational corporation Vale SA in Brazil, for example. The company extracts iron ore in Brazil, with a significant portion being shipped to Qingdao, China, to enter hundreds of large steel factories. These iron ores are processed into basic alloy products there.
However, when some of these steel products are exported back to Brazil, they are priced much lower than local companies such as Gerdau, CSN, and ArcelorMittal’s steel plants.
A similar situation is unfolding in Colombia.
Colombian steel manufacturer Paz del Río has requested the government to raise import tariffs to help the company restore profitability.
The company’s CEO, Fabio Galán, stated in an interview last month that Chinese steel is being sold in Colombia with a 50% discount.
The company mentioned that the influx of Chinese alloys not only jeopardizes local employment but has completely replaced imports from Brazil and Mexico. In the year ending in April, 92% of steel wire imports were from China and Russia.
Despite the significant increase in Chinese steel imports to Latin America, which harms local steel plants, these steel products only account for around 1% of China’s annual steel production of 1 billion tons. This reduces the likelihood of retaliatory measures by the Communist authorities due to Latin America’s tariffs.
Experts believe that raising tariffs is still not a perfect solution for Latin American steel-producing countries. One reason is that tariffs will raise mining costs.
Francisco Urdinez, director of the Chilean think tank Nucleo Milenio Iclac studying the China-Latin America relationship, said, “It is necessary to respond to the challenges brought by economic globalization. But this (imposing tariffs) is not a fundamental solution. It’s just a band-aid that will ultimately be passed on to consumers.”
Humberto Barbato, executive director of Abinee, the Brazilian Electrical and Electronics Industry Association, stated that in Brazil, raising tariffs is not enough to prevent dumping because Brazil is a major consumer of steel. Instead, the government should prioritize purchasing locally produced steel with high domestic content.
Barbato said, “Chinese companies have a great deal of flexibility to change prices.”
(References from Bloomberg)