(Bloomberg) -- Chilean steel and iron ore producer Cap SA plans to close its mills, saying new tariffs on Chinese products weren’t enough to ensure the profitability of steelmaking in the South American nation.
The Santiago-based company’s shares surged as much as 9.4%, as Cap switches its focus to more lucrative iron ore operations. Economy Minister Nicolas Grau described the decision as “irresponsible” and “devastating” for the Bio Bio region in southern Chile.
Cap will wind down its Huachipato blast furnaces and other facilities used for the production of steel balls, an input for the local mining industry, incurring a financial impact of as much as $140m, according to a filing to Chile’s securities regulator.
The unit “has been unable to pass on the surcharges recommended by the Anti-Distortion Commission, which makes it economically unviable to continue with the steel business in Chile in its current form,” Cap said.
The decision is a blow for the government of President Gabriel Boric, which scrambled to push through tariffs after Cap announced plans in March to cease steelmaking due to an influx of cheap imports. Chile’s tariffs followed a similar move in Mexico and a pre-election pledge by US President Joe Biden to boost tariffs on some Chinese steel and aluminum exports.
Cap shares were up 5.6% at 10:45 a.m. New York time, heading for the biggest daily gain in more than four months.
--With assistance from Eduardo Thomson.
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