China’s steel dumping strategy has fostered a crisis within Latin America’s steel industry, disrupting local markets and jeopardizing jobs and economic stability. Flooded with cheap steel and faced with China’s unfair competition, countries of the region have taken actions to protect themselves, implementing tariffs and anti-dumping measures on China’s steel imports.
In Peru, the National Institute for the Defense of Competition and the Protection of Intellectual Property (Indecopi) launched investigations into China’s dumping of hot-rolled carbon steel pipes, stainless steel sinks, and steel wire rod. Indecopi’s decision to initiate investigations responded to requests from local manufacturers, including Manufactura de Metales y Aluminio Record S.A., the leading producer of stainless steel sinks in Peru, and Corporación Aceros Arequipa S.A., Tubos y Perfiles Metálicos S.A., and Precor S.A., which argued that imports of these products significantly damage the national industry.
In the case of the stainless steel sinks, according to the evidence, the imports from China seriously affected local industry, with a dumping margin of 491.5 percent between July 2023 and June 2024. “This percentage seems brutal to me,” Sergio Cesarin, coordinator of the Center for Studies on Asia-Pacific and India at Argentina’s Tres de Febrero National University, told Diálogo.
Dumping is the commercial practice of selling manufactured products at below-cost prices, even at a loss, to take over the market, destroy the competition and subsequently set the price at will, causing the closure of small local companies and unemployment
Evidence also points out that, between January 2021 and June 2024, local production of stainless steel sinks fell by more than 71 percent, while domestic sales decreased by about 45 percent. In addition, sinks imported from China were undervalued by more than 80 percent, affecting domestic market prices.
According to state media agency Andina, profitability and productivity also significantly deteriorated. Production per worker decreased by more than 73 percent and the unit profit margin fell by 88 percentage points, reaching negative values in the first half of 2024. In turn, inventories fell by more than 65 percent.
In compliance with international agreements, Indecopi informed the Chinese authorities of its decision. As part of the investigation, which will have an initial six-month term and could potentially extend to nine, Incopi will carry out on-site inspections. If this unfair practice and its impact on the local industry is confirmed, anti-dumping measures could be imposed.
China in the steel industry
China has established itself as the world’s leading steel producer, with most of its steel companies under state ownership. This growth is underpinned by a centralized economy that operates outside the rules of international trade, with access to unlimited financial resources and no market restrictions, investigative journalism platform Dialogue Earth reported.
“China is not only a dominant player in the steel industry but also faces accusations of underhanded practices such as dumping,” Cesarin said. “The Chinese state subsidizes strategic companies known as control companies, and the steel industry is one of the industries that benefits most from this government support.”
Since 2010, the international steel trade has undergone a significant change. China’s steel industry, facing a built-in overcapacity, turned its production toward international markets to maintain its production level, ensuring employment and social stability in the country. Its most effective strategy for gaining market share is to offer low prices, Dialogue Earth reported.
The Latin American steel industry, despite operating under high standards of governance, quality, industrial safety, and environmental regulations, cannot compete with the artificially reduced prices of Chinese steel, Dialogue Earth added. “Peru is an important target for Chinese steel because it has a free trade agreement with China,” Cesarin said.
Companies in countries such as Mexico, Brazil, and Argentina have faced unfair competition, which has led to factory closures, job losses, and deindustrialization. To counter these effects, they implemented tariffs on Chinese steel imports.
According to Cesarin, when a country applies a safeguard measure against China or its products, the negotiation is ultimately with the government and the Chinese Communist Party and not with the company, which complicates the process. “In the case of Peru, there are numerous Chinese projects in mining, infrastructure, and ports, and all of this would have to be put on the table to reach a solution,” he said.
“Despite the limitations imposed by the asymmetry of the trade relationship with China, Latin American governments must take stronger measures to counteract the effects of Chinese steel,” Cesarin concluded. “The Peruvian government, in particular, must demonstrate its commitment to protecting domestic industry, preserving jobs, and establishing fair trade relations.”
