The Board of Directors of Alacero calls regional governments to act decidedly in order to stop Chinese unfair trade and secure regional jobs

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alaceroAlacero, Santiago, May 20th 2015. Yesterday the Board of Directors of Alacero, the Latin American Steel Association, gathered in Sao Paulo (Brazil). The global and Latin American industries´ concern about current installed overcapacity – especially in China- was one of the main topics discussed during the meeting.
The whole world is worried about China´s overcapacity and the harmful effects of its business behavior on the global markets. This fact was validated during the last meeting of the Steel Committee of the OECD (Organization for Economic Co-operation and Development) held on May 11 and 12, where Alacero presented the effects of unfair traded imports from China in Latin America. During the discussions of the Steel Committee, two facts became evident:

1) there is a causality between market-distorting policies and overcapacity and

2) deterioration is escalating rapidly,fueled by the slowdown of the world economy. Therefore, the global and regional steel industries are facing a very complex situation.

Currently, Latin America is the second largest international market for Chinese steel products, with 10% share of shipments. In 2014, Chinese steel exports to the region surpassed 9 million tons. Applying a scheme of state-owned enterprises, subsidies and unfair trade, China managed to grow its share of the Latin American steel consumption from 6% to about 13%, in only five years, displacing local producers, generating
technical stoppages, and production lines and plant closures, and punishing the profitability of local producers.
The main statement of the Chairman of the OECD´s Steel Committee affirmed that “Structural changes must be addressed urgently amid new era of low steel demand and rising exports”. The Board of Directors of Alacero also discussed Latin America´s low growth forecasts, a situation that will hamper regional steel market recovery. The global outlook is not encouraging, either. The Chinese economy, meanwhile, continues to slowdown, with a domestic steel market that has already peaked and begun to decline (-3.3% in 2014) and will continue to fall in 2015 (-0.5%), boosting Chinese exports beyond current record highs.
Recently, China recognized an installed overcapacity of 450 million tons (6 times Latin America´s annual output) and the government has no effective plans to reduce it. In Latin America, Alacero and the national steel associations have been continuously alerting about growing imports of Chinese steel products manufactured in SOEs and introduced to the continent via dumping and subsidized prices, against which private companies cannot compete. As China is not a market economy, its rules are contrary to the Latin American economies.
In turn, Latin American companies are presenting anti-dumping cases to local governments, using the instruments the World Trade Organization makes available to “secure a level playing field.” Currently, 60% of the regional steel-related anti-dumping proceedings -in force or in process- are against China. All these proactivity of the regional industry is necessary, but has proven to be insufficient.

Moreover, the problem of imports under unfair trade conditions extends to the entire steel value chain. In that sense, Alacero´s directors are also concerned about the increasing arrival of Chinese products with high steel content, which reached US$ 82 billion in 2014.
Alacero makes and urgent call to governments of the region to act rapidly and effectively to assure a level playing field in the trade of steel and steel-containing products, particularly in relation to China. “The tools and rules provided by the WTO ensure market competitiveness and governments should implement them promptly. Latin American steel
industry favors regional and intra-regional integration, and subsequent trade liberalization, as far as unfair competitive distortions are avoided”, commented Martin Berardi, President of Alacero.
“Alacero expects Latin American governments to become aware of the risks that the steel and manufacturing value chains of the region are facing. If effective actions are not taken, the impact on regional employment will increase. A recent study conducted by Latin American economists the estimated that for every $ 1 million in imports of steel-containing
products, up to 64 direct, indirect and induced jobs of the manufacturing value chain may be lost.”- Martin Berardi added.
About Alacero
Alacero –the Latin American Steel Association– is the organization that brings together the Steel Value Chain of Latin America to promote the values of regional integration, technological innovation, corporate responsibility, excellence in human resources, safe working environments, and social and environmental sustainability. Founded in 1959, Alacero is formed by 50 companies in 25 countries, whose production –of about 70 million annual tons– represents 95% of the steel manufactured in the region. Alacero is a Special Consulting Organization to the United Nations and is recognized as International Non-Government Organization by the Republic of Chile, host country of Alacero´s headquarters.