Chile's CAP group, a prominent player in the Latin American steel industry, has taken a drastic step by indefinitely suspending operations at its Huachipato Steel Company in the Biobío region. This cessation, driven by alleged dumping of steel bars by China, underscores the precarious balance between local industries and international trade dynamics. The ramifications of this decision reverberate through the national economy, affecting not only the steel sector but also ancillary industries.
In April, the Chilean government introduced provisional anti-dumping tariffs of 24.9% on certain steel products from China, including steel bars. This measure, although a step towards protecting the local industry, has proven insufficient. The tariffs, set to expire in September, failed to stabilize the market prices, rendering CAP's operational continuity untenable. The company's chairman, Julio Bertrand, emphasized that the market's response to these tariffs was inadequate, leading to CAP's accumulated losses of $700 million since 2019.
The suspension will be executed gradually through September, encompassing the cessation of coke production, operation of blast furnaces, steelmaking, continuous casting, and the rolling of long steel products. This strategic withdrawal is a stark reminder of the vulnerabilities faced by local industries amidst global trade imbalances. The decision was communicated to the regulator CMF, highlighting the extensive impacts on employment and regional economic activities.
Álvaro Ananías, head of the Biobío business chamber, expressed concerns over the substantial job losses, affecting both direct and indirect employees. The suspension will disrupt various productive and technological chains linked to the plant, casting a shadow over the regional and national economic landscape. This development calls for a nuanced understanding of the interplay between local industrial policies and international trade practices.
Despite halting its steel operations, CAP will continue its non-steel ventures such as limestone extraction and sales, as well as port and logistics activities. These sectors, although not immune to the broader economic impact, offer some respite and continuity for CAP’s business portfolio. The company’s resilience is further demonstrated by its commitment to advancing a pilot plant for producing green steel from iron ore, an initiative aligned with global sustainability trends.
Moreover, CAP maintains its partnership with Aclara Resources and REE Alloys to extract rare earth at the Penco Module project. This collaboration underscores CAP’s strategic pivot towards high-value, non-steel businesses amidst challenging market conditions. The focus on green steel and rare earth extraction positions CAP at the intersection of innovation and sustainability, potentially mitigating the adverse impacts of its steel operation suspension.
