Fears of Chinese steel imports back to haunt LatAm

Friday, May 5, 2017

After seeing imports of Chinese steel decline 19% in 2016 to 7.6Mt, following over a decade of growth, an upward trend is starting to pose a familiar threat to Latin America's steel industry.

Latin America's steel imports from China increased 5% year-on-year in January-February to 1.3Mt, according to the latest data from regional steel association Alacero.

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The region's share of China's finished steel exports in the first two months was 9.9%, compared with 6.9% a year ago and just 1% in 2004.

In January, Latin America's steel imports from China jumped 35% year-on-year to 822,000t. Compared to December, steel imports from China increased 29% from 636,000t.


In Brazil, the region's largest steel producer, the local industry is already pressuring the government to take action to protect domestic mills.

Last month, local steel association IABr voiced concerns about growing steel imports and a possible trade probe by the US into Chinese steel imports.

According to Sérgio Leite, the CEO of Brazil's largest flat steelmaker Usiminas, local producers fear Chinese steel prevented from entering the US could be diverted to other markets, among them Brazil.

Furthermore, Brazilian steel imports – priced lower than locally produced steel – have also grown this year.

Steel imports in the first quarter jumped 73.1% to 637,000t, according to IABr.

Brazil's distributors imported 110,100t of steel in March, up 118% and 85.3% year-on-year and month-on-month, respectively, according to data from national distributors association Inda.


In Mexico, Latin America's number two steel producer, the economy ministry announced on April 6 the extension of a 15% tariff on steel imports, citing continued unfair competition and oversupply in the global steel market, with China and other Asian countries seen as the major culprits.

The tariff extension was welcomed by local steelmaker Ahmsa, which said the move was essential to its continued operations and planned investments.

Meanwhile Mexico's finished steel imports from China are dropping, suggesting the tariff and antidumping duties are doing their job.

Economy ministry officials may be unwilling to risk jeopardizing the sector's growing confidence by removing the duty, but the case for maintaining it has been significantly weakened.


The Latin American steel value chain – which includes raw materials, finished steel and indirect trade – saw its trade deficit with China decrease 30% to US$21.7bn in 2016.

Chinese imports of finished steel from the region totaled 9,000t, a 40% decline.

"While Latin America continues to record a surplus in the trade of steel raw materials with China, this is not enough to compensate for the deficit in finished products and indirect trade. This trade declined compared to 2015, breaking the upward trend of recent years. The region needs to increase its capacity to manufacture and export higher value-added products in order to reduce the gaps that exist with the main economies of the world," Alacero said in late-March.