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Chile: finance minister asked a steel company to assume responsibility for going bankrupt | After the closure of the Huachipato steel mill

2024-04-04 03:01:00

The Chilean Minister of Finance, Mario Marcel, asked this Wednesday the group that owns the Huachipato steel company to get involved and not transfer to the Government all responsibility for the future of the country’s main steel producer, which announced the cessation of its operations due to the impossibility to compete with China.

“Huachipato is a subsidiary within a business group, the CAP group, which is a solvent group (…) I believe that the solution should involve not only the Government, but also the group itself,” Marcel said in an interview with the EFE news agency.

“I think it is complex that (the CAP group) completely transfers to the Government the decisions regarding the future of one of its subsidiaries,” insisted the minister, who also urged the mining companies to get involved because they buy most of the steel they produces Huachipato and the problem “cannot be solved by a single actor.”

“The mining industry also has some interest in this supply alternative existing. During the covid-19 crisis, when all transportation from China was stopped, it was Huachipato and other steel companies that provided inputs to mining,” he recalled. Marcel.

The closing process

The steel company announced on March 20 the suspension of its activity indefinitely given the critical situation it has been going through for more than a decade and after considering the anti-dumping measures against steel from China, a country with which Chile has a free trade agreement, insufficient. since 2006.

Dumping is a practice of selling below cost price with the aim of gaining market share. The Anti-Distortion Commission, an independent institution that advises the Chilean Presidency, decided to apply an average provisional tax of 15.3% to steel balls and 15.1% to steel bars.

Located in the southern city of Talcahuano, 500 kilometers from the capital, Huachipato recorded losses of $385 million in 2023 and requests a minimum tariff of 25% for steel bars and 33% for steel balls to solve the distortions that Chinese steel is producing. CAP group revenue reached $2,965 million in 2023, representing a year-on-year decrease of 1.4%, while gross profit was $691.4 million, 9.3% less than in 2022, according to data from the conglomerate.

The company’s closure process would be completed within three months, and is estimated to have a financial impact of up to approximately $100 million over the next 12 months. The firm’s decision puts at risk more than 22 thousand jobs that depend directly and indirectly on it, according to a study cited by the Chilean newspaper La Tercera. This study also indicates that more than 1,000 SMEs, whose annual sales exceed 339 million dollars, depend on the existence of Huachipato.

Chinese competition

The Siderúrgica Huachipato was inaugurated in 1950 when CAP was a state company. During the 1980s, during the dictatorship of Augusto Pinochet, the company and the plant passed into private hands. Despite being a relatively small company in the world steel market, with a production of one million tons per year, the situation in Huachipato set off alarms in the region, where part of the steel that the Asian giant could not place in its market arrives. due to the slowdown of its economy.

In the last two decades, China went from being a large importer of steel to one of the main producers, going from producing 15% of the world’s steel in 2000 to 54% in 2023, according to Alacero, an employer’s association that brings together the large Latin American steel companies. The EU and more than fifty countries, such as the United States, Mexico, Canada, Brazil and India, applied anti-dumping measures in recent years to balance the distortions caused in local markets by Chinese steel.

Parliamentary resolutions

Given the closure of Huachipato and the situation of its workers, on Tuesday the Lower House approved eight resolutions presented by the different parliamentary committees, ranging from the Communist Party (PC) to the Republican Party (PLR). In general terms, these aim to ask President Gabriel Boric to take immediate protective measures for the steel industry and improve the diversification of the productive matrix and revalue national production, CNN Chile indicated.

The parliamentarians also insisted on the idea of ​​​​increasing surcharges to face unequal competition with Chinese industry and requested establishing protection measures for workers, in addition to improving investment in infrastructure in the region.

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