Colombian steelmakers join Latin American pushback against long steel imports

Steelmakers in Colombia have called on their government to follow in the footsteps of Mexico and Brazil and significantly increase import duties to curtail arrivals of wire rod from China and elsewhere, Fastmarkets understands

Three Colombian steel producers – Acerías Paz del Río, Diaco and Siderúrgica del Occidente (Sidoc) – have called on the country’s Ministry of Commerce and Industry to open an investigation and to increase safeguard measures from 5% to 35% to curb imports of low-carbon steel wire rod from China.

The request – which, according to market participants was made in November 2023, but only came to light last week – also includes sanctions against wire rod imports from Russia.

China and Russia account for one in every four tonnes of imported wire rod in the Colombian market, a spokesman for Paz del Río told local media outlets last week.

Such a move would bring an end to “unfair competition” and “predatory prices,” Daniel Rey, director of the Colombian Committee of Steel Producers (which is linked to the National Business Association of Colombia, ANDI), told Fastmarkets on Thursday March 14.

Rey said there was clear evidence that an increase in imports from China and Russia had led to “price distortion.”

But the Colombian Chamber of Construction (Camacol) has previously opposed any increases in steel import tariffs, alleging that a drop in imports would lead to higher prices and shortages in the housing sector.

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In January-September 2023, imports of iron and steel for use in Colombia’s construction sector totaled 1.63 million tonnes, down year on year from 1.80 million tonnes, Camacol’s latest data showed.

But, according to the Colombian Committee of Steel Producers, the requested duty increase would make housing costs in the country just 0.38% higher and would have “an absolutely marginal impact,” Rey said.

He added that the duration of any new measures would be decided by the government.

In early 2024, the Latin American steel association Alacero told Fastmarkets that countries in the region were increasing their efforts to establish greater protection for their domestic steel industries, following moves by Mexico.

And while the Colombian steel industry’s main concern is wire rod imports, the request for greater import tariffs could be extended to cover growing imports of foreign rebar, according to Rey.

“We are open to carefully analyzing the market to see how this situation evolves,” he said.

Since the US imposed Section 232 tariffs of 25% on imported steel in 2018 and since the EU, Mexico and other countries subsequently followed the US lead, any resulting leftover steel has been redirected to Latin America, Rey added.

Brazil’s steel association, Aço Brasil, has called on the government to increase import duties from 9-12.6% to 25% for products such as hot-rolled, cold-rolled, galvanized and Galvalume coil, in addition to wire rod and rebar, and cold-rolled and hot-rolled stainless steel. And on March 1, the Brazilian government opened an anti-dumping investigation into Chinese tinplate and chromium-coated (tin-free) steel.

Even so, the steel industry regards these measures as insufficient.

Competition from non-free trade agreement countries

Colombian steel products are subject to Free Trade Agreements (FTAs), which eliminate or reduce tariffs for some partner countries.

The steel sector in Colombia has FTAs with the US, Venezuela, Mexico, Chile, the EU, the Mercosur trade bloc (Argentina, Brazil, Paraguay and Uruguay) and countries of the Andean sub-region (Peru, Ecuador and Bolivia).

But despite not being members of the FTA, Chinese and Russian steel have been coming into the country more easily due to lower prices that are considered “predatory” and do not reflect current local prices, Rey said.

“In January… we found rolled steel products entering the country at a cheaper price than the raw materials,” he said.

Fastmarkets’ latest assessment for steel wire rod (mesh quality) export, fob China main port was $550-560 per tonne on March 5, down week on week from $560-570 per tonne and down month on month from $570-575 per tonne.

At the moment, non-FTA countries represent 90% of the share of imports, surpassing the countries with which Colombia has import duty agreements, according to data from the Colombian steel committee.

“Costs have grown, and the local industry’s profit margins have been narrowed to try to compete, which is putting our companies’ sustainability at risk,” Rey said.

Colombian construction demand at its lowest level

Colombia’s apparent consumption of rolled steel close to 3.5 million tonnes per year and imports can account for 25-45% of demand, depending on the steel product.

With only five steelmakers – Acerías Paz del Río, Diaco, Sidor, Ternium and Grupo Siderúrgico Reyna – the country only produces long steel, including rebar, wire rod and profiles. And that long steel is mostly used in the construction sector.

But in 2023, Colombian steel demand was at its lowest level in the past 15 years, according to Rey.

In January-November 2023, sales in the housing sector fell by 45.3% year on year, which represents 111,024 fewer units and an equivalent reduction in steel purchasing, according to Camacol data.

Meanwhile, China has maintained the rhythm of its steel production at about 1 billion tonnes of crude steel output despite a serious decline in construction, with excess steel diverted to overseas markets.

One consequence of that, Rey said, is that the Colombian steel industry produced 1.47 million tonnes of long steel in 2023 – a decline of 2.65% from the 1.51 million tonnes in 2022.

“For China, our market may not mean much, but for us, it is everything,” he said.

Rey told Fastmarkets that, after being presented with this scenario, the Colombia Ministry of Commerce, Industry and Tourism appeared receptive to the steelmakers’ requests, but no date was set for a conclusion.

In 2023, the Colombian government investigated the need for safeguarding measures on rebar imports from the countries of the Andean sub-region.

“In December, we had a positive response from the government [on that] and now we are waiting for a decree [to establish a higher tariff],” Rey said.

Steel import tax could help with decarbonization goals

Rey said that requests for tax increases on steel imports to Colombia would also help the country hit its decarbonization targets.

While China emits 2.1 tonnes of greenhouse gases (GHG) per tonne of steel produced, Colombian steel emissions amount to only 0.67 tonnes of GHG per tonne of steel, according to ANDI statistics.

“Around 80% of national steel production is made from scrap and is, therefore, less polluting,” Rey said. “So the steel industry has a very important [role] in terms of decarbonization and needs to be economically profitable to be able to finance this transition.”

“Does it make sense, in addition to destroying jobs, to buy in steel that is generating more pollution, when cleaner and less-polluting steel could be produced here?” he added.

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