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Latin American steelmakers see threat from China - ILAFA

Reuters reported that Latin American steelmakers see an increasing threat from cheap Chinese imports and want governments in the region to take steps to guarantee fair play.

Regional powerhouse Brazil introduced measures last week aimed at curbing imports of cheap steel products made in China that Brazilian steelmakers complain are flooding the market.

Mr Daniel Novegil CEO of Latin American steelmaker Ternium said that the woes of Brazilian steel firms are shared by companies throughout the region and that governments should do more about it because jobs are at risk. He added that "To the extent that we acknowledge that employment is important for our countries we'll find a common agenda to defend ourselves from competitors who are predatory, who are disloyal."

According to the Latin American Iron & Steel Institute, demand for steel is growing rapidly in the region, but the output of Latin American steelmakers is not rising as fast because of an influx of imports from China.

Mr Andre Gerdau Johannpeter CEO of Brazilian steelmaker Gerdau said that ILAFA data shows that between 2008 and 2010 steel imports in Brazil soared 250%, whereas exports rose 70%, an unbalance that is echoed in the region.

He said that Latin American steelmakers are competing on an uneven playing field with their Chinese rivals and that local governments should guarantee transparent and fair rules. He added that "There are countries that give more subsidies; borrowing costs are subsidized, the governments control the companies, production does not follow laws to protect the environment. It's possible to compete with privately owned companies, but it's very difficult to compete against governments."

Mr Gerdau said plans by the Brazilian government to impose minimum import prices for 16 types of steel products such as hot rolled and cold rolled steel, wire rods and rebar are steps in the right direction.

ILAFA sees demand for steel increasing by 8.4% in 2011, while the World Steel Association has forecast that growth of global steel demand will slow to 5.3% in 2011 from 13.1% in 2010.

Meanwhile, the USD 500 billion steel industry, a bellwether for the broader economy, profited in the second quarter from a strong auto sector and booming Chinese demand, but since then the latter in particular has cooled. Iron ore and coal costs rose, but steel prices did not and globally the fragmented steel sector is running at about 70% to 75% of capacity.

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