Chile’s only steel mill announced that it would close due to competition from cheap Chinese imports. This is a major blow to the government of the country, which had placed tariffs on China in an attempt to save the company earlier this year.
The Chilean steelmaker CAP which operates the Huachipato Mill in Chile’s central Bio Bio Region, announced on Wednesday that they would shut down their steel operation “indefinitely” in September. They blamed an influx in imports from China, for the more than $500mn of losses in the last two years.
Huachipato is a major supplier of steel to Chile, the massive copper mining industry. Chilean officials view Huachipato as strategically important. In Bio Bio, the plant directly and indirectly employs 20,000 people.
The economy minister Nicolas Grau stated on Wednesday that the decision was “devastating” for the Bio Bio Region. He added that the government had made great efforts to reverse the decision.
China accounts for nearly 40% of Chile’s exports, the highest share among Latin American countries.
Over the last two years, governments in Latin America and Asia have been complaining about a rise in the number of cheap exports from China in many sectors as China struggles to cope with a weaker domestic market.
Alacero, a Latin American steel industry association, said that the region imported 10mn tonnes (44 per cent more) of Chinese steel by 2023.
Huachipato suspended its operations temporarily in March due to the impact of Chinese imports. Chile’s government imposed temporary duties of 34% on steel balls imported from China, and 25% on the bars that were used to manufacture them. These duties were in place for six months. The officials said that they may be extended depending on the outcome of an anti-dumping investigation being conducted by Chile’s Anti-Price Distortion Commission.
The ambassador of China to Chile, who spoke in June, told Chilean journalists that the tariffs “damaged economic and commercial relations” between Chile and China and “harmed legitimate interests of Chinese companies”.
CAP, who also mines ore in Chile said that the market conditions meant they were unable to raise steel prices despite tariffs. “This made it economically unviable for the steel business to continue in Chile as it is currently structured.”
Grau called the decision to close the plant “irresponsible”, and blamed CAP and the local steel ball maker Molycop, for not “reaching an agreement on pricing and sales that they could have achieved given the new conditions created by the tariffs”.
He said that the government will “continue to make all [possible] effort[s] to reverse this decision”.
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