Shutdown of CSH plant creates concern over future of Chilean steelmaking

The indefinite suspension of operations at Chilean steelmaker CSH's rolling mill in Biobío region, due to a financial crisis and alleged dumping of imported Chinese steel bars, has generated concern among workers and related industries.

Economy minister Nicolás Grau said the suspension was due to a dispute between CSH and US-based steel ball producer Moly-Cop, which, alongside parent company CAP’s steel division, had called for protective measures against what they described as unfair competition from China, with some surcharges being applied.

Moly-Cop was one of the biggest customers of CSH, purchasing steel bars to manufacture grinding balls for the mining industry. However, CSH sought to raise prices and secure longer-term contracts to compensate for the decrease in sales due to the import of Chinese steel.

Moly-Cop, facing competition from the cheaper imports, resisted the price increases, leading to an impasse in negotiations between the firms, since there was the possibility of sourcing cheaper steel from other suppliers. 

The situation further strained their relations and CSH finally decided to halt operations.

Since 2005, Chile has had a free trade agreement with China, which has significantly increased trade but also led to more accusations of unfair competition.

On several occasions, a Chilean market investigation commission, comprised of government officials, recognized the dumping practices and imposed tariffs to address the issue.

In April, the ministry of finance imposed a provisional anti-dumping duty of 24.9% on steel bars and 33.5% on steel balls imported from China, despite opposition from importers like Magotteaux, a subsidiary of Sigdo Koppers.

These compensatory measures are set to expire in September and have proved insufficient. CSH’s management and worker unions were therefore talking to the national economic prosecutor’s office (FNE) to persuade the government to either hike the tariffs or extend them for one or two years.

However, CSH announced that it will gradually shut down its coke production, blast furnace operations, steelmaking, continuous casting and rolling of long steel products over the coming months.

Finance minister Mario Marcel criticized CSH and Moly-Cop as "irresponsible" for failing to reach an agreement, stating that more than 2,800 workers and thousands of related industrial processes would be affected.

The Chilean steel institute (ICHA) told BNamericas that the decision would "deprive the country and the mining and construction industries of high-quality steel."

Steel bars are crucial for manufacturing the grinding balls needed in mining to crush rock and extract minerals.

The construction industry will also be hit because the concrete reinforcing bars produced by CSH meet the standards required for infrastructure and housing projects in Chile, a highly seismically active country, explained Alberto Maccioni, president of ICHA in a statement.

Nonetheless, CSH has asserted that it will remain a strategic partner for the mining, metalworking, and construction industries and will promote a green steel project along with other clean technology-related businesses.

In the steel segment, CSH owns Cintac in Chile, Tupemesa, Calaminon and Sehover in Peru, TASA in Argentina, Promet Chile and Promet Perú. 

Despite having invested US$300 million last year and initiating a cost reduction plan at CSH, which accounted for 10% of CAP’s total steel production, CAP reported a loss of US$385mn last year, with revenues down 14.5%.

Various solutions to CSH's problems have been suggested, including a possible acquisition by the State or the involvement of a Chinese shareholder.

CAP's shareholders currently include M.C. Inversiones Ltda., a subsidiary of Japan's Mitsubishi Corporation, which holds a 12.5% stake.