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Cheap Chinese steel is a double-edged sword for Mexico

Cheap Chinese steel is a double-edged sword for Mexico

Mexico is among several countries trying to strike an economic balance to deal with cheap Chinese steel flooding world markets.

Annual Chinese steel production totals approximately eight hundred metric tons, while Mexico’s output tops out at about one fortieth of that amount, or at twenty million a year. China utilizes half of its producers’ steel for application in its domestic manufacturing, and, subsequently, sells its remaining production at what many nations are increasingly calling dumping prices. In mid-June, steel manufacturers associations worldwide, including those located in Mexico, the United States and the European Union, registered protests regarding the dumping of cheap Chinese steel on global commodities markets.

In Mexico, on one hand, cheap Chinese steel imports represent a troublesome threat for the nation’s domestic manufacturers. The principal unions that represent steel producers, the Sindicato Nacional de Trabajadores Mineros, Metalúrgicos, Siderúrgicos y Similares and the Camara Nacional de Acero (Canacero), have warned Mexico’s Ministry of Economics that the dumping of cheap Chinese steel into the Mexican market at unfair, state subsidized prices may put up to thirty thousand Mexican jobs at risk. The Union has called for the levying of punitive tariffs on Chinese imports in order to protect its workers. Already, several Mexican steel producers have laid off, or plan to dismiss, large number of steelworkers as a result of what they believe is unfair competition. These companies include:

  • DeAcero – The firm has dismissed 2,500 individuals, and has suspended production at one of its plants;
  • Arcelor Mittal Mexico – has announced that it will make a cut in its workforce of 2,800.
  • Altos Hornos de Mexico (AHMSA) – disclosed in June that it would take the countermeasure of laying of 4,500.

On the other hand, some of the nation’s industrial base, primarily Mexican auto makers view cheap Chinese steel imports in a positive light. This is because its presence in the Mexican market exerts downward pressure on the cost of the primary input for the product that it manufactures. Sales of Chinese steels into Mexico have increased between 6% and 10% on a yearly basis between 2010-2014. Passenger vehicle production industry leaders such as Eduardo Solis, president of the Mexican Automotive Industry Association (AMIA), contents that the application of punitive tariffs and/or duties on cheap Chinese steel imports will have a negative impact on, the Mexican automotive industry, one of the country’s most dynamic and fastest growing manufacturing sectors. Another industry which voices a similar opinion
is involved in the production of home appliances and “white goods.”

At the beginning of the present month, Ildefonso Guajardo, Mexico’s Secretary of the Economy announced that his ministry would refrain from applying financial penalties to cheap Chinese steel imports at this time. The reason that was given for the exercise of present restraint is that an increase in the cost of imported steel will have the effect of pushing end product prices upward, thereby affecting their competitiveness in international markets. There is, however, a delicate balance to be had between this consideration and that of preserving the health and well-being of Mexico’s domestic steel industry.

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