Battle over tariffs dominates Chile's steel industry

Local companies Feifan Chile and Magotteaux are attempting to overturn a measure ordered by a Chilean fair trade committee to establish provisional antidumping duties on imports of steel bars and balls from China.

The companies have filed a case with the Santiago appeals court, alleging that favoritism has been shown towards domestic firms, particularly benefiting local steelmaker CSH (Huachipato) and Moly-Cop, a manufacturer and distributor of forged steel balls.

Feifan, a subsidiary of China's Changshu Feifan Metalwork, and Magotteaux, linked to the Chilean group Sigdo Koppers, are challenging the antidumping tariffs that were enacted to reverse declines in the sales of CSH, a steel subsidiary of the group CAP, and Moly-Cop, which has also seen revenues hit.

Although steel marketer Francisco Stern agrees with policies aimed at stemming the flow of Chinese imports into Latin America, he fears that imports could surge after the tariffs expire in September, since companies "always aim to avoid paying more,” he told BNamericas.

Chile's provisional tariffs were set at 24.9% for steel bars and 33.5% for steel balls, but they only last until September 9, although Héctor Medina, president of the No. 1 workers union of Huachipato, recently told BNamericas that “we want [the tariffs] to be extended for four years."

Other impacts

The battle over tariffs comes in the midst of a difficult situation for the Chilean steel industry, which grew only 0.1% year-on-year in the first quarter, due to the "lack of investment and infrastructure projects," Fernando García, president of the association of metallurgical and metalworking companies, Asimet, said in a statement.

García attributes the situation to lower demand for lifting and handling equipment in the mining industry and the deterioration of the construction industry, which makes it “difficult for the metallurgical and metalworking industry.”

Lawyer Alfonso Domeyko, an expert in mining and construction, agreed with this view, telling BNamericas that “there is a lack of financial and tax incentives for the country to advance with development, since engineering is somewhat paralyzed at the moment.”

In addition to construction, steel bars and profiles are widely used in the mining industry, but Chile's mining sector has been on the decline in terms of its attractiveness to investment, according to the latest annual report by the Fraser Institute.

In the latest edition, Chile was ranked 38th out of 86 countries and jurisdictions, after having been listed sixth in 2018, with difficulties in obtaining permits to develop projects cited as one of the main causes for its decline in appeal to investors.

However, in spite of these hindrances, García expects the domestic metallurgy and metalworking industry to grow by between 1% and 3% this year.

Exports of the Chilean industry slipped 15.2% year-on-year to US$516mn FOB in 1Q24, with imports from China still high.

Last year, apparent steel consumption in Chile reached 2.39Mt, of which 33% was locally manufactured steel and the rest imported, with China accounting for 65%. That was the largest market share for China since 2016, according to data from the Chilean steel institute.

Moly-Cop, CSH, Aceros Chile and Prodemol have struggled to maintain their operations in Chile, with the latter two being forced to withdraw from the market since "they were unable to survive at the low prices with dumping from China," Moly-Cop Chile CEO Gustavo Alcázar told local media in February.

Investments in mining and construction are key to ensuring the future of the metal and metalworking sector, experts say, as are clearer definitions of the role that Chinese steel should play in Chile.