Approximate reading time: 2 minutes, 8 seconds
During the year 2023, the Chinese real estate industry presented clear symptoms of crisis, which continue throughout this year. The crisis of a sector as important as that, in any country in the world, has consequences on the entire national life. In the case of a country with so much presence and so much connection with the international market, such as China, these consequences are also present in other economies commercially related to China.
The real estate crisis has lowered the demand for iron and steel in that country, which means that the steel industry itself and its supplying sectors have to lower their production levels, accumulate unsold volumes and/or lower their sales prices, to be able to stay in the market. The negative effects of this entire situation can be mitigated if this steel is placed in other international markets, even if this requires lowering the sales price. This may seem like a positive situation for countries that lack a steel industry with relative weight in their domestic market, since they will be favored by the lower price of a product that they are obliged to import with all the intensity that their market I demanded it. But this same situation may not be so positive for countries that do have a medium-sized steel development, since they will be faced with competition from cheaper products from abroad, which threatens to remove them from their own national market, with the consequent negative effect on production and employment.
That is the situation faced by the Huachipato steel plant, which the national press has been reporting on in recent weeks. Faced with this, Chile has decided to protect itself through safeguards, that is, by raising the tariff faced by the imported product to leave the national product in a better competitive position. The new tariff level is not yet known precisely, but it already seems a fact that this path will be followed.
But Chile is not the only one facing situations of this nature. Brazil, through the Ministry of Development, Industry and Foreign Trade, has also recently initiated an investigation into this steel problem, under pressure from the affected steel sectors. Colombia faces the same situation. The Colombian Committee of Steel Producers has asked the government to take safeguard measures.
Neither Colombia nor Brazil have free trade agreements signed with China, but both have carried out great and sustained efforts in recent times to strengthen trade with said country, and it is not easy to enter into conflict with a partner that has so much power in the contemporary international trade and with which so much effort has been sought to increase relations. Internationally, however, especially at the level of the World Trade Organization, there are agreements and standards that could be appealed to to face circumstances such as these.
But for a small country it is not always enough to be right, when it comes to conflicts with powerful countries. China produces 54% of the world’s steel, and Chile and Colombia each buy 1.1% of Chinese exports of that product. Brazil, in turn, buys 2.5%. Separated, each country weighs little, but together they reach 4.7% of Chinese international sales, which is a slightly higher percentage, if a solution to a common problem could be negotiated and jointly sought. Unfortunately, the old idea that there is strength in numbers is not always seen as the winning formula, since each person continues to believe that they are strong enough to sue and win alone.
By Sergio Arancibia