Increase in Chinese rebate poses a threat to Latin American steel

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A measure which strengthens the Chinese steel industry in the post-pandemic scenario generates unfair competition, leading to a downturn in Latin American industry and a job loss

Alacero - São Paulo, June 2020. While the new coronavirus pandemic is reducing demand throughout world markets, Chinese exporters have increased their tax rebate for 1,464 products since March 20. The export tax rebate rate for steel products such as wire rod that went from 0% to 13% and hot-rolled alloy coils that increased from 10% to 13% between January 2019 and March 2020. The increase, intended to boost operations and strengthen China´s industry, has an impact mainly on exports of hot-rolled products and wire rod, raising the rebate and generating an advantage of US$ 10 to US$ 15 per ton in exports.

Imports under unfair conditions can lead to plant shutdowns and job losses in the Latin American steel industry, as China's surplus is sold in the region at prices with which domestic producers cannot compete. “The most effective way to capture new markets is through price, and the Chinese government has the financial capacity to subsidize steel, impacting Latin America, especially now that many doors in other places in the world are closed to them. In this region, our industry works according to market rules, and we are unable to compete under these conditions. We need to protect the regional industry and not provide free access to unfair imports”, said Francisco Leal, Director-General of Alacero.

The Latin American steel industry is competitive and operates in accordance with world-class governance, environmental quality and safety standards. Among the main actions which can be implemented to protect the domestic industry are a more effective customs inspection, quality assurance policies required for imports and the enforcement of all instruments established by the WTO. In light of surplus capacity, it is clear that it is still a centralized planning economy and not a market economy.

These new measures by the Chinese government are designed to provide immediate aid to companies, and although the year started out with fewer exports, they are recovering quickly. The low activity led to a record steel inventory, at least 20 million tons higher than the previous year. “In this context, we confirm that we have sufficient capacity (in Latin America) for the future growth of the industry without need for imports. In Mexico, a new hot rolling capacity is being incorporated ”, says Leal.

Alacero leads the efforts to disseminate the message about the dangers of this unfair trade practice among opinion leaders and governments across the region, showing the continental dimensions of the problem. We are specifically asking that Latin American governments establish clear rules and adopt a strategic vision and act with determination. Latin American steel companies are in favor of competition and open trade, when the same terms are applied to all. The only way to generate the quality jobs and development that our economies need is to ensure a solid foundation for the steel industry.

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