Alacero, 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.

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Alacero – Santiago, Chile, May 15, 2014. Last Tuesday in Bogotá (Colombia), during the semiannual meeting of Alacero´s Board of Directors, presided by Martin Berardi, participants analyzed the current situation of the steel value chain and defined action lines to strengthen the promotion of the industrialization process and to ensure fair trade conditions in the region.

Latin America: difficult times today and lights in the medium-run Alacero informed the Board of Directors about the regional economy and its impact on the steel industry. While in 2011 the regional GDP had grown 4%, in 2013 it expanded just 2.2%. Even when 2013 was a difficult year for several Latin American economies, a first outlook for 2014 displays a slightly higher growth rate of 2.3%. Prospects are more encouraging for 2015, when regional growth should consolidate, favored by the recovery of the central economies.

Industrial production, a more crucial indicator of the rhythm of industrialization, grew just 0.5% in 2013. This figure that shows the virtual stagnation of the activity turns even more dramatic as it follows a previous drop of -0.3% in 2012. Expectations for 2014 are more positive as industrial production should grow 1.9%. However, these are still insufficient to be considered signs of a real return of the region to the path of industrialization.

Scenarios for the next 2 years differ from country to country. In some cases, they are less conducive and marked by inflation and possible stagflation, commodities´ prices deterioration, fiscal restraint and reduction of private investment. In other cases, they look more encouraging and include infrastructure investments and the recovery of the steel demanding sectors.

In line with the GDP and the industry, the main steel demanding sectors showed moderate expansion in 2013. Construction (47% of the regional steel consumption) grew just 1.4%. Automotive expanded 7.1%. Metallic products dropped -1.8%. In 2014 and 2015, these scenarios will improve because of the expansion of metallic goods production and some growth in automotive and construction.

Following the previous indicators, in 2013 apparent steel use was not able to grow vs 2012 and showed dissimilar results by country. Brasil grew 4.8%; Argentina, 2.8%; Mexico dropped -8%; Chile, -11.9% and Venezuela, -5.3%. Colombia expanded its steel use just 1.1% and Peru, 7%. However, the current year looks better, with a growth rate of 4.5% that would continue to increase by 3.1% in 2015.

Ensure fair trade in Latin America

One of the topics of the agenda of the steel value chain is the marked growth of Latin America as preferred destination for Chinese exports of steel and steel containing goods that many times arrive under unfair trade conditions; a concern that is becoming extensive to Turkish exports to the region, too.

Latin America represents less than 5% of the global finished steel consumption (about 67 million annual tons). However, in 2013 it accounted for 9% of the Turkish total exports and 10% of the Chinese ones. This describes how attractive the region is for both producers.

For several years, Alacero has been monitoring trade flows between Latin America and China of raw materials, finished steel and indirect trade of steel. Recently, Alacero added a new Yearbook about trade flows with Turkey that was introduced to the Board of Directors.
This report shows that in 2013, Turkey exported 1.26 million tons of steel to the region, most of them being long products for construction. This country supplied 20% of the regional imports of long products from abroad.

The case of China is even more serious. During the last 6 years, between 2008 and 2013, Chinese exports to the world grew just 5.2%, from 51.4 million tons to 54.1 million tons. However, in the same period, Chinese finished steel arriving to Latin America more than duplicated: increasing from 2.6 million tons in 2008 to 5.7 million tons in 2013.

The Board of Directors urged the Association to continue to make follow-up of the anti dumping measures and commercial safeguards in the region, to collaborate with its associates providing information about the actions being taken by country, and to cooperate to reinforce the message to governments to confront unfair trade.

Martin Berardi, President of Alacero, was very clear about the role of the Association: “Alacero should work even harder to generate awareness about the harm that the arrival of products under subsidized and unfair conditions –especially from China- causes to Latin America in terms of job losses, decrease of fiscal income, reduced investment and economic sustainability”.

The environmental factor

Another of the discussed topics was the relation between environmental regulation and international trade, and its consequences on Latin America and the steel industry. Latin America has a very limited weight in the environmental problems of the world. Regional steel industry causes just 0.23% of the global emissions of CO2. Even though, it makes efforts to measure and minimize its impact throughout all its productive processes. Its main companies participate actively of worldsteel´s (the World Steel Association) “Climate Action Program” by reporting their emissions. They also develop internal practices for environmental care.

However, the Latin American steel industry should operate in a global context where environmental regulations and requirements are neither clear nor uniform enough when they refer to the exchange of goods among countries. There are legal loopholes and a lack of unequivocal criteria.

Confronted with this situation, Alacero supports the principles promoted by the Latin American countries that defend the principles of equity, with differentiated responsibilities that compensate the historic environmental debt of the developed countries. Also, they call for financial and technological support to face the climate change problems.

Through its Board, Alacero has proposed to adopt common criteria to be included in national and supranational regulations, among which are: 1) assessment of similarities between domestic and imported products, following the precept of non-discrimination of the WTO; and 2) support for environmental measures that: a) do not restrict or impede trade, b) ensure environmental legitimacy and not merely pursue revenue goals, and c) are based on scientific evidence.

Alacero announced that these topics will be part of the Congress Alacero-55 that will take place in Mexico City between November 9 and 11. These subjects will be addressed by a number of world-class specialists such as: Emilio Lozoya (General Director of PEMEX), Edwin Basson (General Director of worldsteel) and Aryam Vázquez (from Oxford Economics). Also, this year the Congress will include Alacero-Next, a panel focused on innovation and technology, including Harold Sirkin (Senior Partner at BCG and author of the bestseller “Globality”), and a debate with 11 of the most important CEOs of the Latin American steel industry that will share their vision on the future of the regional steel.

About Alacero

Alacero –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 and social and environmental sustainability. Founded in 1959, Alacero is formed by 48 companies of 25 countries, whose production –of about 70 million annual tons- represents 95% of the steel manufactured in Latin America. 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.

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