LatAm urged to forge stronger trade, tariff policies to save the steel industry

Steel plant closures in Chile and Argentina reflect the deep crisis the regional steel industry faces as Chinese imports upset the market and local economies struggle.

Chile’s CSH, part of the CAP group, completed the closure of its rolling mill in mid-February as part of a cost reduction plan. A commission was set up to investigate price distortions caused by imports and CSH's complaints about dumping and subsidies to determine the damage to domestic production.

The labor unions and the company are awaiting a decision, requesting a safeguard of around 25% for Chinese steel, specifically for steel balls used in copper mining, to avoid definitive closure.

Meanwhile, in Argentina, Acindar, part of Luxembourg's ArcelorMittal, is preparing to suspend operations at four plants due to the recession and lack of government funding for public works, which has resulted in sales plunging.

BNamericas talks to Alejandro Wagner, head of Latin American steel association Alacero, to gain insights into the problems and how they can be solved.

BNamericas: What do you think about the developments at CSH and Acindar?

Wagner: The potential [definitive] closure of the Huachipato plant, along with the suspension of operations at four Acindar factories, reflects a structural problem in the Latin American steel industry that has been simmering for more than a decade, which is the growing threat of Chinese steel imports below market value.

This situation isn't exclusive to the region. However, it's important to highlight that other countries and trading blocs have implemented significant corrective measures. For example, Europe, North America and more recently Mexico, have adopted tariff policies on imports for major steel products of close to 25%. These measures seek to protect local industry and preserve jobs, while addressing environmental challenges.

BNamericas: How has Chile acted in this regard?  

Wagner: In Chile, the tariffs applied are considerably lower, even reaching 0% in some cases. Various studies have shown that the impact of these tariffs on the price of final products such as cars, buildings and agricultural machinery is minimal. In contrast, the economic and social effects of importing steel, particularly from China, are significant.

Chinese steel not only affects high-quality local jobs in the steel industry but also implies a larger carbon footprint, 45% higher than the Latin American average, exacerbating environmental problems.

BNamericas: What other factors influenced Acindar's decision and how could the problem be resolved?

Wagner: The situation in Argentina reveals a deep economic crisis, which aggravates the challenges faced by the steel industry. Faced with this panorama, it's crucial that Latin American countries review and adjust their trade and tariff policies to protect their local industries.

This could include the implementation of higher tariffs on steel imports, measures to promote sustainable local production and regional cooperation strategies to strengthen the industry's competitiveness in the global market. 

Furthermore, it is imperative to address environmental challenges by promoting clean and efficient production practices, aligned with sustainable development goals.

BNamericas: How will the decisions by Acindar and CSH affect the Latin American steel and iron ore mining industry?  

Wagner: The impact is significant in both environmental and economic terms. With a production that represents 55% of the world's steel, China emits 2.24t of CO2 for every ton of steel produced, 45% more than the average emissions in Latin America, which is 1.55t of CO2 per ton of steel.

This highlights the greater efficiency and lower carbon footprint of the Latin American steel industry compared to the Chinese one. In addition, Chinese steel imports in Latin America reached a record last year, which worsens the environmental impact due not only to the emissions associated with steel production but also those of international transportation.

This phenomenon is exacerbated by the fact that China, not having a lot of iron ore and coal, imports these raw materials from Latin America, uses them to produce steel and then exports the finished steel back to the region.

This dynamic implies an even greater cycle of emissions when both the production and transportation of raw materials and finished steel are considered and is an example of the deindustrialization it brings to our region.

In the perspectives and trends for the Latin American steel industry, it is essential to consider the development of more sustainable and efficient practices to maintain competitiveness in the global market.

This includes the adoption of clean technologies, energy efficiency and reducing dependence on steel imports from regions with higher emissions. The promotion of local steel production not only helps reduce the carbon footprint but also supports the regional economy and sustainable development.