Iron and Steel - International Business

FREE TRADE vs PROTECTIONISM WORKSHOP
Group 6 - IRON AND STEEL
World steel and iron exports are mainly dominated by Chinese exports, followed by those of
Japan and Germany. The annual growth in value between 2017 and 2018 is 13%. The top
three steel and iron importing countries are, initially, the United States, followed by China
and Germany.
Colombia's exports account for 0.2 per cent of world steel and iron exports and its rank in
world exports is 54. Its main partners are China (45.8%), Japan (8.2%) and the Netherlands
(7.5%). Every country importing Colombian steel and iron imposes customs duties on its
imports of steel and iron, except the Netherlands.
Theoretically, free trade leads to a virtuous circle. The opening of the market stimulates
companies to be increasingly competitive in order to face international competition. This
means improving facilities, increasing efficiency and sharing knowledge through
partnerships with foreign companies. This whole circle ultimately has an impact on
employment and the purchasing power of workers. That is what was happening in Vietnam,
a developing country. And it can be done in Colombia under certain conditions.
● Choosing its importing partners and benefits from free trade agreements.
As local businessmen, we consider that it is necessary to make a free trade agreement in

this area, since recently Colombia was not exempted in the White House review of steel and
iron tariffs. This would be a source of mutual benefits for both countries. Since in the case of
the recent imposition of 25% tariffs on steel by the United States, the first victims were the
consumers of their own country, as local producers raised prices as soon as the news was
confirmed.
With this, we consider that free, open and fair trade in steel and aluminum is a crucial
component for trade restrictions within the region to be removed in a responsible manner,
and to prevent unfair (illegal) trade in the region from being addressed effective way.
For Colombia in 2017, 600 million dollars in iron, steel and its derivatives and 235 million in
aluminum and its manufactured goods were exported to the United States. But the impact
is not limited to exports to it. The restriction of access to the US market will generate a
diversion of trade of millions of tons, which will have to compete for alternative markets.
Colombian exporters will not only lose a large part of the North American market, but will
also see prices drop.
● Establishing partnerships with foreign companies.
International groups such as Ternium, Votorantim and Gerdeau have chosen to set up
operations in Colombia. These companies enable the transfer of knowledge, a key element
in improving competitiveness and investment. This is proof but also a stimulus to the
benefits of free trade.
● Growing global demand for steel and iron.
The steel and iron sector is the basis for the development of many other sectors such as
construction, automobiles, household appliances, machinery, armament, etc. As steel and
iron are the main inputs of a growing sector, growth forecasts encourage exports
worldwide.
● An intense competition which favors efficiency
Free trade maintains the spirit of competition of the Colombian economy, notably about the
steel and iron sector. China/India are the most important iron and steel producers.
Workforce is cheaper, productivity is higher. Intense foreign competition under free trade
=> domestic producers do not want to lose their grounds. As a result, investments from the
Colombian government: developing and promoting the movement, aerospace and
shipbuilding industries that use iron and steel as their main raw material.
Besides, it tends to prevent domestic monopolies. Most important danger from monopolies:
high prices for consumers.
● IRON AND STEEL in Colombia and COVID-19
The Colombian government declared a quarantine which restricted the operation of non-
essential companies until April 13th, 2020. Specifically on Iron and Steel industry, there
exist only three exceptions in which the companies may continue operation:
- Companies that have machinery that cannot be turned off, such as blast furnaces or
zinc-dip galvanizing processes.
- Companies that are supplying materials to an infrastructure work that cannot be

stopped or in case they are currently working in a construction that requires
structural strengthening actions.
- Companies that provide transportation and supply of imported raw materials and
logistics of steel that is used for export. [1]
As it can be seen in the exceptions, the government considers maintaining exports as a vital
operation for sustaining the country, keeping alive the economy minimizing the risk of
spreading infections within the country.
An additional restriction for operation involves availability of raw material for the fabrication
of steal:
- “inputs to the sector it has been affected by the Chinese confinement, already
extended by two months while the closures of borders and mandatory quarantines
aimed at curbing the spread of the disease in Latin America now threaten to
exacerbate the deficit”.
- “While mining companies have responded by acquiring new inputs and
strengthening their critical inventories, analysts warn that prolonged pandemic could
reduce those stocks and forcing mines to suspend operations.” [2]
The main response of the colombian based companies is to strengthening its emerging
stocks consumables to ensure continuity of operations, nevertheless if the supply chain
continues to stay blocked, they will be forced to close.
The current position of some colombian companies that have already ceased operations is
to continue paying salaries. For example, Siderúrgica de Oxidente (Sidoc) declared that they
are going to pay the salaries of the 700 employees it currently has. Also, once the company
resumes activities, it will continue with the program of distribution of profits among
workers, which has already distributed more than $ 4,000 million. The company’s
administration and board declared: "In these moments premium unity and joint action to
move forward," [3]
Sidoc is an average company in Colombia (7th of the main 15th companies based on
income). This position of Sidoc can be replicated by the other companies of the sector, that
have similar current assets to face this crisis (see chart 1)
Chart 1.
Taken from [4].
References:
[1] CamAcero explica en qué condiciones pueden trabajar las empresas en

aislamiento.https://www-emis-com.ezproxy.uniandes.edu.co:8443/php/search/doc?
pc=CO&dcid=675445984&indu[]=3311&embed=1&get_rest_results=1&nooffset=1&hidebro
kerlinks=1&hidesortshowpaging=1&hidequickpreview=1&skip_facets=1&rpp=20&query_en
try=emis-company-profile-
revamp&unhide_post_articles=0&scop[]=25&scop[]=31&scop[]=23020101&todate=28%2F0
3%2F2020&range=range&ptyp[]=TN&dtyp[]=1&dtyp[]=2&frmt[]=1&frmt[]=2&frmt[]=3&frm
t[]=4&frmt[]=5&sort_by=date&first_load_rpp=20
[2] ¿Las mineras latinoamericanas enfrentan una crisis logística por el COVID-19?
https://www-emis-com.ezproxy.uniandes.edu.co:8443/php/search/doc?
[3] Planta de Siderúrgica de Occidente en el Valle del Cauca estará cerrada hasta el 13 de
abril https://www-emis-com.ezproxy.uniandes.edu.co:8443/php/search/doc?
[4] INFORME SECTOR HIERRO Y ACERO JUNIO 2019 . Sectorial.co, Acceso a traves de EMIS

Iron and Steel - International Business

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Iron and Steel - International Business

Uploaded by

Copyright:

Available Formats

FREE TRADE vs PROTECTIONISM WORKSHOP

Group 6 - IRON AND STEEL

As local businessmen, we consider that it is necessary to make a free trade agreement in

● Establishing partnerships with foreign companies.

● Growing global demand for steel and iron.

● An intense competition which favors efficiency

● IRON AND STEEL in Colombia and COVID-19

- Companies that are supplying materials to an infrastructure work that cannot be

[1] CamAcero explica en qué condiciones pueden trabajar las empresas en

You might also like