Colombian steelmaker Paz del Río Bets on tariff hike as China imports surge

Colombian steelmaker Paz del Río is betting authorities will raise import tariffs soon and help return the company to profitability as an influx of Chinese alloy floods Latin American markets.

“This is urgent,” Chief Executive Officer Fabio Galán said in an interview Wednesday. “Jobs are at risk.”

With Chinese shipments coming in almost 50% cheaper and some Colombian mills already curtailing output, authorities are looking into raising tariffs from the current 5%. Paz del Río, the country’s only integrated producer, is gunning for the maximum 35% and expects a decision in the coming weeks. 

If Colombia does lift tariffs, it would be following in the footsteps of Chile, Mexico and Brazil as a slowdown in Chinese domestic demand means more steel is reaching Latin American shores where tariffs were lower than in the US and Europe. Chinese steel shipments to Colombia jumped 46% in the first quarter from a year earlier, data compiled by Kallanish Commodities show.

For now, Latin American nations are opting to safeguard mills and jobs even at the risk of souring relations with a major trading partner like China and pushing up prices for local buyers of steel. 

Paz del Río accounts for about a fifth of the Colombian steel market. It posted losses of about 30 billion pesos ($7.6 million) last year due in large part to the flood of steel from China and Russia, and faces a similar scenario this year if measures aren’t taken, Galán said. While the firm hasn’t cut output because of increased foreign shipments, others in Colombia have.

“Predatory prices,” exacerbated by local currency moves, are making the steelmaking business “unsustainable,” he said.

Colombia’s Trade Ministry will deliver the results of its investigation to the Tariff and Customs Affairs Committee, which in turn will make recommendations back to the government.