Is China playing unfair? The impact of indirect steel trade on Latin America’s economy
While the world’s main economies are in recession, trade tensions between China and the US continue to build up. Against this backdrop, Latin America must not only come to terms with the aftermath of the pandemic, but also find a way to deal with US protectionist trade policies and China’s unfair indirect steel trade.
As we can read on the website of Alacero (Latin American Steel Association), Chinese imports related to indirect steel trade have grown by 3.5% in 2019, compared to 2018, which is equivalent to some 7 Mt. Of these, 1.22Mt were cars and commercial vehicles.
Brazil and Mexico are the biggest offenders here, with a staggering 57% of the total value imported by the region (representing around 45% of the imports in tons). Mexico was the main indirect trade market with US$ 17,157 million, a growth of 5.8% compared to 2018. Brazil had an increase of 4.5% in the related expenses, reaching US$ 11.068 billion.
With regards to rolled products and derived steel products, the main destinations were Chile (1.2 Mt, accounting for 20% of the region’s total), followed by Peru (1.1 Mt, 17%), Central America (1 Mt, 16%) and once again Brazil (0.8 Mt, 13%).
The total steel imports (which include rolled products – long steel products, flat steel and seamless tubes – and derived products as wires and welded tubes) by Latin America from China reached 56% more than in 2018. It is important to note that this growth was not enough to increase the trade deficit, as the region experienced an overall decrease of 14% in imports.
How to deal with indirect steel trade and maintain the industrialization levels of the Latin American steelmaking industry? According to Alacero, investing in local consumption, expanding production capacity, reducing infrastructure gap between regions, and exerting tighter control over the imports are all necessary steps to fight China’s unfair trade practices while at the same time attain the reindustrialization process: “After the pandemic, the trend is for the world’s steel demand to favor the countries that have enough overcapacity to resume low-cost production. Therefore, we recommend continued investments in infrastructure and consumption of the local production as ways to achieve a greater representation of Latin American steel in regional consumption” says Francisco Leal, Alacero’s General-Director.
Photo by worldsteel / Gregor Schläger
