Chile’s largest and only integrated steel plant, Huachipato, announced on Wednesday (August 7) that it is unable to sustain its finances amidst intensified Chinese product dumping and thus will “indefinitely suspend” operations.
The operator of Huachipato steel plant, Compañía Siderúrgica del Pacífico (CAP), attributed over $500 million in losses over the past two years to the influx of Chinese goods.
According to Agence France-Presse, the company’s board of directors stated that the decision to indefinitely suspend operations was made due to the inability of Huachipato to competitively price its steel products in the face of “intensified Chinese dumping,” despite Chilean government imposing tariffs on Chinese steel products.
The Chilean government views Huachipato’s decision as “irresponsible,” with at least 2,700 workers directly affected and up to 20,000 job positions indirectly linked to the plant.
Huachipato had previously suspended operations in March of this year due to inability to compete with the cheaper prices of Chinese imported steel products, with the latter priced 40% lower. In April, the Chilean Ministry of Finance imposed temporary tariffs of 24.9% on imported steel bars and 33.5% on steel balls from China, lasting for six months and potentially being extended until the results of Chile’s anti-dumping investigation come out.
These two products are crucial inputs for copper production, an industry in which Chile holds a world-leading position.
In a statement, Huachipato steel plant expressed that “four months after the implementation of these measures, market dynamics have made it impossible to correct the imbalance and transfer these tariffs to prices.”
The company’s board believes that the additional fees are insufficient to induce structural changes in the market, thus failing to ensure the current financial viability of the steel enterprise.
The process of suspending steel operations will be gradual and is expected to be completed by September.
According to the Financial Times, Chilean officials view Huachipato as a significant supplier of steel materials for the country’s large copper mining industry, holding strategic importance. The factory employs approximately 20,000 people directly and indirectly in the Biobío region.
“This is an extremely destructive decision for the Biobío region. The entire nation is aware that as a government, we have made tremendous efforts to reverse this situation,” stated Minister of Economy Nicolás Grau on Wednesday.
Data from the Latin American Steel Association (Alacero) shows that last year, Latin America imported a record-breaking 10 million tons of Chinese steel, marking a 44% year-on-year increase. Governments in Latin America and Asia have been complaining about the surge in cheap exports from China over the past two years as the Chinese Communist Party seeks solutions to domestic weak demand.
The United States has also taken measures against China’s cheap steel and products such as electric cars. On May 14, President Biden imposed tariffs on a series of strategic materials from China, including steel, aluminum, electric vehicles, batteries, semiconductors, and critical minerals, in response to unfair trade practices by the Chinese Communist Party and to mitigate the damage caused, aiming to protect American workers and businesses.