Peru Investigates China’s Steel Dumping and Its Impact on Local Industry

Peru has commenced investigations into China’s steel dumping, targeting products such as stainless steel sinks, which have severely impacted local production and employment. The National Institute for Competition and Protection (Indecopi) is responding to calls from domestic manufacturers amidst rising tensions over unfair trade practices. Other Latin American countries are facing similar dilemmas, implementing tariffs to counter Chinese imports, while experts argue for stronger protective measures against this challenging trade landscape.

Peru is currently investigating China’s dumping of steel products, which has led to significant disruption in Latin America’s steel industry, adversely affecting local markets and employment opportunities. In response to the influx of inexpensive steel from China, numerous countries in the region have implemented protective measures, including tariffs aimed at countering this unfair competition.

The National Institute for the Defense of Competition and the Protection of Intellectual Property (Indecopi) in Peru has initiated an inquiry into the dumping of various steel products from China, including hot-rolled carbon steel pipes, stainless steel sinks, and steel wire rod. This action follows requests from Peruvian manufacturers such as Manufactura de Metales y Aluminio Record S.A., the top producer of stainless steel sinks, and other local companies, which claim that these imports are severely harming the domestic industry.

Evidence suggests that from July 2023 to June 2024, the margins for dumping of stainless steel sinks from China were exceedingly high, reaching 491.5%. As noted by Sergio Cesarin, an expert on Asia-Pacific studies, this statistic is alarming. The practice of dumping involves selling goods below production costs to monopolize the market, which can lead to the closure of local businesses and job losses.

Data has shown that there has been a drastic decline in domestic production of stainless steel sinks, dropping by more than 71% since January 2021, and a decrease in domestic sales by about 45%. Furthermore, the prices of the Chinese imports were undervalued by over 80%, which has destabilized the domestic pricing structure.

The profitability and productivity in the sector have also been severely impacted, with a 73% reduction in production per worker and an unprecedented drop in profit margins to negative figures during the first half of 2024. Additionally, inventory levels have fallen significantly by more than 65%.

Indecopi has communicated with Chinese authorities regarding these investigations, which have an initial duration of six months and may extend to nine. This investigation could result in anti-dumping measures if allegations of unfair practices are substantiated through in-depth assessments, including onsite inspections.

China has positioned itself as the leading global steel producer, with many of its companies being state-owned. This growth has been fueled by a controlled economy that does not adhere to international trade protocols. According to reports, state subsidies enable Chinese steel companies to offer products at reduced prices.

Since 2010, China has shifted its steel focus to international markets to sustain production levels and employment, utilizing low pricing as a primary strategy. Countries in Latin America, such as Mexico, Brazil, and Argentina, have experienced similar pressures from Chinese competition, resulting in factory closures and increased unemployment.

Chinese economic ties with Peru, bolstered by a free trade agreement, have made the country a significant focus for steel imports. According to Cesarin, negotiations to impose trade safeguards against Chinese products involve the Chinese Communist Party, complicating the process. He asserts that Latin American governments must pursue stronger measures to mitigate the negative impacts of Chinese steel and protect their industries more effectively.

The investigation into China’s steel dumping in Peru highlights the broader challenges faced by Latin American countries in safeguarding their domestic industries against unfair competition. With significant declines in production and profitability observed, the need for protective measures, including tariffs and investigations, is paramount. Governments must navigate complex trade relationships while upholding their commitments to protect local economies and employment.

Original Source: dialogo-americas.com