- Leaders try to change perception Brazilian steel is subsidized
- Both countries concerned with flood of Chinese exports
Brazil’s embattled steel industry is on a charm offensive with U.S. officials whose anti-dumping measures are reducing shipments at a time the Brazilian economy endures its worst recession in a century.
Last month, the U.S. slapped a 34 percent tariff on some Brazilian imports in one of a series of trade cases filed by U.S. producers amid a global glut. That prompted Brazil’s Minister of Development, Industry and Trade Armando Monteiro to sit down with officials in Washington.
“There’s this allegation that subsidies exist,” Monteiro said in a telephone interview. “The Brazilian government does not believe it is subsidizing the local market.”
While declining to give details of his meeting with U.S. Trade Representative Michael Froman, Monteiro said Brazil is hoping for more bilateral coordination on steel matters. The South American country wants to differentiate itself from others flooding the market and plans to work in concert with the U.S. to address overcapacity at international forums such as discussions being held in Brussels this week.
He said there’s no easy solution as “all countries are adopting protectionist policies.”
For Brazilian producers such as Gerdau SA and Cia. Siderurgica Nacional SA, the U.S.’s still-buoyant auto and construction industries offer a way to offset the dire situation at home. Brazil’s consumer-led growth has run out of steam, the commodities boom is long over and exporters can expect little help from a slowing China.
At the same time, an unprecedented amount of overcapacity in China is threatening steelmakers globally, Wiley Rein LLP, a Washington-based law firm representing U.S. steelmakers in trade cases, said in a report last week. The glut is set to worsen as Chinese steelmakers add an estimated 103 million tons capacity from this year to 2018, the firm said.
Shipments of some steel products from China to the U.S. dropped after the Department of Commerce set preliminary penalties as high as 266 percent.
In the case of Brazil, laminated steel shipments to the U.S. probably will drop by 4 million metric tons as a result of the tariffs from a total of almost 14 million tons last year, according to Brazil’s Steel Institute.
The U.S. has unfairly lumped Brazil’s lower-cost steel products together with other countries’ such as those from China, based partly on the assumption Brazil subsidizes its industry, Marco Polo de Mello Lopes, who heads the institute, said in an interview. He’s seeking the reinstatement of tax breaks for the industry to help offset a slump in prices.
“I assure you, like Monteiro has assured the American government, there are no subsidies for Brazilian steel exports,” he said.
Although nothing definitive has been formalized between the U.S. and Brazil, Monteiro is pleased that a dialogue has begun and that the two countries appear to be aligned when it comes to dealing with the overcapacity frightening producers across the globe.
“We are in the midst of a war in which the presence of these Chinese state-owned companies are making it very difficult to find a balance,” he said.