Closure of Huachipato steel plant sparks protest over Chinese tariffs

After a demonstration at Chile's Moneda presidential palace led by union leaders and workers of steelmaker Compañía Siderúrgica Huachipato (CSH), a fair trade committee will make another review of accusations of unfair competition leveled at Chinese steel imports.

Since February, operations at the bar rolling mill in Talcahuano, Biobío region, which is owned by the group CAP and run by its subsidiary CSH, have been halted indefinitely due to multimillion-dollar losses caused by imports of Chinese steel products at lower-than-market prices.

Although the committee, formed by officials from the central bank, the national customs department and representatives of the ministries of economy, finance and foreign affairs, has acknowledged that there are irregularities in steel imports from China, its proposal to apply import tariffs of around 15% is considered insufficient to prevent market distortion.

In addition to the 22,000 workers employed by the plant either directly or indirectly, the jobs of some 88,000 people in the BioBío region are threatened due to the mill shutdown, according to a study by Universidad Católica de Concepción.

This is because 1,090 SMEs are linked to the mill's value chain, involving sales of around US$339mn per year. The study also shows that the steel company is the biggest contributor to public finances in the region, paying US$2bn to authorities.

Speaking to BNamericas, Héctor Medina, president of Huachipato's No. 1 workers' union, said the demonstration in capital Santiago was positive, since "the minister of economy [Nicolás Grau] presented our appeal for reconsideration so that the fair trade committee meets this Thursday and reconsiders our request to apply a 25% surcharge on steel bars and 33% on grinding balls.”

Medina added that the initiative has great support. "We were received by the minister of economy and the labor minister [Jeannette Jara], along with 10 union leaders, the representative of contractors who total some 1,300 people, the governor of Biobío, the mayors of Talcahuano and Chiguayante, the president of the port union, the president of [labor organization] the CUT and parliamentarians."

The Chilean port union – which includes all the country's port workers – has been on strike, accusing the government of failing to comply with commitments on labor and safety matters, adding to the situation at Huachipato.

"The Huachipato crisis is damaging us since there has been a considerable reduction in shifts. The southern dock is halted and the northern dock will also have problems," Gabriel Rebolledo, spokesperson for the Talcahuano-San Vicente port union, was quoted as saying by local media.

With regard to the allegedly unfair imports from China, a Chinese steel trader told BNamericas on condition of anonymity that "it has been going on since 2008 when sales of Chinese steel products in South America did not stop growing. It affected Mexico, Paraguay, Peru and Brazil."

"The only historically protected market is Argentina. This is because we have had problems importing there for 10 years," the source added

Regarding the problems at the Huachipato plant, the source underscored that it was always going to suffer problems. "Chile signed an FTA with China and Chilean importers were happy buying Chinese steel, because it stimulated competition and no one put a stop to it."

Last year, China produced 1.02Bt of crude steel, some 54% of the total produced globally, according to data from the World Steel Association.

In addition to China meeting its domestic steel demand in order to carry out a structural transformation in the country with new infrastructure and industries, the Asian giant began exporting its government-subsidized surplus steel at below international market prices, becoming a critical supplier for world value chains.

While Chile, Brazil and Mexico continue to seek solutions to protect their local steel mills and continue investigations into dumping from China, Huachipato workers have not lost hope that they can obtain a favorable response from the fair trade committee on the tariffs requested.

“Our request is in line with international standards, where 54 countries have already placed a tariff surcharge on China,” said Medina.

This week, US Treasury Secretary Janet Yellen said in a meeting with Chinese officials that, for more than a decade, there has been a flood of “below-cost Chinese steel ... decimated industries across the world and in the United States. I’ve made clear that President Biden and I will not accept that reality again,” she was quoted as saying by AP.