Mexico is making significant strides in enhancing its steel industry, positioning itself as a potential leader in the regional market. In contrast, Argentina and Brazil are struggling to tap into their full capabilities, as highlighted by top officials from leading steel producers in the area.
WHY IT MATTERS
The steelmakers – Ternium, Gerdau, and the Brazilian unit of ArcelorMittal – have consistently voiced concerns regarding an uneven playing field within the region’s steel market. They particularly point to China‘s practices of “dumping,” which involves inundating markets with steel products sold at prices significantly below market value, undermining local producers.
In response to these challenges, Mexico has implemented a series of tariffs on selected steel imports and initiated a robust program to trace the origin of steel products. This move aims to close loopholes that allow China to circumvent tariffs by shipping steel through intermediary countries before it arrives in Mexico.
CONTEXT
Jefferson de Paula, the head of ArcelorMittal Brasil, underscored the vast potential for steel demand in Latin America, asserting that the region could see substantial growth. However, he warned that persistent political and economic instability, coupled with an influx of cheap Chinese steel and finished products, continues to pose significant obstacles.
Gustavo Werneck, the CEO of Brazilian steelmaker Gerdau, noted that governments have been sluggish in adopting robust measures to counteract dumping practices from foreign producers. Recently, Brazil responded to these challenges by imposing approximately 25% import tariffs in an effort to protect its domestic steel industry.
WHAT’S NEXT
Mexican President Claudia Sheinbaum, who assumed office at the beginning of October, has unveiled a comprehensive plan aimed at collaborating with industry stakeholders to strengthen the steel sector, according to Maximo Vedoya, CEO of Ternium. The country is also poised to leverage a significant supply chain shift characterized by the trend of “nearshoring,” which could benefit local production.
Despite the potential, Vedoya expressed caution regarding Brazil’s current industrial standing, noting, “Brazil has the ability to enter the Americas’ supply chain, with all the capacity it has. But it’s far from benefiting from this regionalization phenomenon.”
Turning to Argentina, Vedoya emphasized the critical need for the country to stabilize its macroeconomic environment before rolling out comprehensive industrial policies. He remarked, “Argentina has distorted costs for everything – taxes, labor, regulations. If we want to have industry, we need to make it more competitive.”
KEY QUOTES
In discussing international efforts against Chinese steel practices, Vedoya stated, “The United States is leading the way (in measures to combat Chinese steel). Europe is next, India, Mexico. Brazil is taking the first steps. The rest of Latin America should follow.”
Werneck emphasized, “We (steelmakers in Latin America) are not asking for any type of special treatment. We’re asking for an even playing field to ensure fair competition.”
BY THE NUMBERS
Global steel consumption averages approximately 223 kg (492 lbs) per person, yet de Paula pointed out that in Latin America, this figure is less than half, highlighting the region’s underutilization of its steel production capabilities.
**Interview with Gustavo Werneck, CEO of Gerdau**
**Editor:** Thank you for joining us today, Gustavo. Mexico seems to be gaining momentum in the steel industry while Argentina and Brazil are facing challenges. What are your thoughts on Mexico’s recent initiatives to support its steel sector?
**Werneck:** Thank you for having me. Mexico’s steps, such as imposing tariffs on selected steel imports and enhancing tracking measures, are valuable moves. These initiatives are necessary to safeguard their local industry against practices like “dumping,” particularly from China. It’s a commendable effort that could help Mexico emerge as a regional steel leader.
**Editor:** You mentioned dumping. Can you elaborate on how this issue impacts the steel market in Brazil?
**Werneck:** Certainly. The influx of cheap Chinese steel compromises our production capabilities and distorts the market. Local producers struggle to compete when faced with products sold below their production costs. This unfair competition undermines not just our companies but also the economic stability of our sector.
**Editor:** ArcelorMittal Brasil’s Jefferson de Paula highlighted the vast potential for steel demand in Latin America. What do you believe are the key areas of growth for the steel industry in the region?
**Werneck:** The demand for steel in construction, infrastructure, and energy sectors is on the rise. However, to capitalize on this potential, we need a supportive regulatory environment. Consistency in government policy, combating illegal practices, and investments in innovation are crucial for us to thrive.
**Editor:** Brazil has responded with a 25% import tariff recently. How effective do you think this measure will be in protecting the domestic steel market?
**Werneck:** While it’s a step in the right direction, the effectiveness of the 25% tariff largely depends on enforcement and monitoring. We need to ensure that these tariffs cannot be easily circumvented. Coordination with other regional governments could amplify our efforts to create a fairer playing field.
**Editor:** Looking ahead, what further actions would you propose to strengthen Brazil’s steel industry?
**Werneck:** We need a multi-faceted approach. Beyond tariffs, increasing collaboration between governments and the private sector is essential. I would advocate for more investment in R&D and sustainable practices to enhance competitiveness. Additionally, diplomatic efforts to address our concerns with China at trade forums could help in leveling the playing field.
**Editor:** Thank you for your insights, Gustavo. It’s clear that the steel industry in Latin America has significant potential, but collaboration and robust policies will be essential moving forward.
**Werneck:** Thank you for having me. It’s important to keep the conversation going to ensure the growth of our industry in a sustainable and fair manner.
