Chile more reliant on imports on steelmaker suspension

Chile will soon find itself more reliant on steel imports after a key mill announced suspension of operations as it faces heightened competition from cheaper imported steel.

Chilean steel mill Siderurgica Huachipato (CSH), whose production of long steel supplied the country's construction sector, earlier this month said it would shutter its steelmaking operations by September, saying it is not able to financially operate in Chile anymore.

Huachipato said that imported steel was posing a challenge to the company's financial recovery. The company did not give a timeframe for operations to resume.

Now, the fate of Huachipato — and Chile's steel-consuming sectors — is in the hands of imported steel, as the country is one of the continent's largest steel consumers, but lacks sufficient local production.

Supply, demand gap plugged by imports

Chile is South America's largest consumer of steel on a per capita basis, consuming 112kg/metric tonne (t) of rolled steel per capita in 2023, compared with the 107kg/t per capita consumed by Brazil, according to data from Latin American steel association Alacero.

But Chile produced only 1.2mn metric tonnes (t) of steel in 2023, over 26 times less than the 32mn t Brazil produced in the same period.

Chile imported 1.6mn t of iron and steel in 2023, according to data compiled by Global Trade Tracker. Of those, 63c came from China, 14pc from Japan and 7.6pc from South Korea.

Import ratios remained similar over the first half this year, with China supplying almost 62pc of all Chilean steel imports, while Turkey stood as the third largest steel supplier to Chile, with a 5pc stake, behind Japan's 14.4pc.

Chile, which was already reliant on imports, is now set to increase its demand for overseas material.

Sourcing strategies

Chilean steel association ICHA said that products such as flat steel for structural use would be supplied by imports, but added that consumers must verify the quality of steel to comply with Chilean standards and regulations.

The steel will chiefly come from China, a source who trades steel to the country said, as most Latin American products are still more expensive than the Asian material.

Chile could have part of its demand supplied by local steelmaker AZA, another source told Argus, as the Chilean mill has secured an important stake in the country's steel sector over the years. But it is unlikely that the company could compete with lower prices of the imported material, the source added, citing that Turkey has been able to penetrate the Chilean market over the years by complying with the country's strict regulations.

Imports will not be under threat of higher tariffs like other Latin American countries, which in recent months have imposed further tariffs on Asian steel. Chile's own recently-imposed duties on Chinese steel balls and bars will only last six months.

Brazil could be another source for the Chilean market, Alacero told Argus. Brazil, which represents a 4pc share of Chilean steel imports, would also face the challenges of competing with China, Alacero said.

By Carolina Pulice