Peru has initiated investigations into China’s dumping of steel products, responding to local industry concerns. This move follows a notable decrease in domestic production and sales due to unfair competition from overvalued Chinese imports. The situation underlines the need for stronger measures to protect the local steel industry and emphasizes the complexities of trade negotiations with China.
China’s strategy of dumping steel in international markets has created significant turmoil within Latin America’s steel industry, prompting the region to react with protective measures. Countries have responded by imposing tariffs and anti-dumping laws to shield their markets from the economic fallout of cheap Chinese steel.
In Peru, the National Institute for the Defense of Competition and the Protection of Intellectual Property (Indecopi) has initiated investigations into the dumping of certain steel products, specifically hot-rolled carbon steel pipes, stainless steel sinks, and steel wire rod. Local manufacturers like Manufactura de Metales y Aluminio Record S.A. and Corporación Aceros Arequipa S.A. prompted these investigations, asserting that the influx of Chinese products harmfully impacts the domestic industry.
Particularly concerning is the case of stainless steel sinks, where evidence indicates a staggering dumping margin of 491.5 percent from July 2023 to June 2024. The coordinator of the Center for Studies on Asia-Pacific and India noted, “This percentage seems brutal to me,” highlighting the severity of the situation.
The impact of dumping has been harsh, with local production of stainless steel sinks declining by over 71 percent and domestic sales dropping approximately 45 percent between January 2021 and June 2024. Additionally, Chinese imports have been found to be undervalued by more than 80 percent, negatively affecting market prices across Peru.
Productivity metrics illustrate a troubling trend; production per worker fell by more than 73%, while profit margins decreased by 88 percentage points, entering negative territory in the first half of 2024. Furthermore, the country’s inventory levels have plunged by over 65 percent, indicating a severe market crisis.
Indecopi has formally notified Chinese authorities regarding its investigative efforts, which are set to last an initial six months, potentially extending for nine months with on-site inspections. Should the investigation confirm unfair practices, Peru may impose anti-dumping measures.
China’s dominance in the global steel market is bolstered by state ownership of its steel companies and financial resources that exceed international norms. This has led to accusations of dumping, supported by government subsidies as described in the investigative work of Dialogue Earth.
Since 2010, China’s steel industry, overwhelmed with excess capacity, has refocused its production towards international markets, utilizing low pricing strategies. Meanwhile, Latin American countries struggle due to stringent governance and industry regulations, rendering them unable to compete with China’s subsidized pricing models.
Countries across Latin America, including Mexico, Brazil, and Argentina, have similarly encountered the adverse effects of Chinese steel, leading to factory shutdowns and job losses. In response, many have enacted tariffs on Chinese steel imports to mitigate these adverse impacts.
Addressing this issue is complex, as negotiations predominantly take place with the Chinese government rather than individual companies. Sergio Cesarin noted that the existence of numerous Chinese investments in Peru, particularly in mining and infrastructure, complicates negotiations related to steel trade.
Ultimately, experts advocate for a robust response from Latin American governments against Chinese steel threat. “The Peruvian government, in particular, must demonstrate its commitment to protecting domestic industry, preserving jobs, and establishing fair trade relations,” emphasized Cesarin.
The crisis instigated by China’s steel dumping has led to significant implications for Peru’s steel industry, spurring investigations by Indecopi into harmful imports. The ramifications include steep declines in local production, sales, and profitability, with suggestions for stronger trade measures to safeguard domestic interests. Experts emphasize the necessity for Latin American countries to take decisive actions while navigating complex negotiations involving the Chinese government.
Original Source: dialogo-americas.com
