The Chilean government described the Huachipato plant's decision as "irresponsible," with at least 2,700 workers directly affected and as many as 20,000 jobs indirectly linked to the plant.
The company's board of directors said the decision to "indefinitely suspend" operations was made because it was impossible to competitively price its steel in the face of "the intensification of Chinese dumping," even with the tariffs in place.
The decision came after the finance ministry in April imposed temporary tariffs on Chinese imports of steel bars and balls of 24.9 percent and 33.5 percent respectively.
Both products are key inputs in copper production, in which Chile is the world leader.
"Almost four months after the measure was implemented, market behavior has made it impossible to correct the imbalances and to transfer these tariffs to the price," the company said in a statement.
Huachipato's board of directors concluded that the application of surcharges would not be enough to generate structural changes in the market to ensure the financial viability of the steel business in its current form.
The suspension of the steel company's activities will be gradual, with the process to be completed in September, the company said.
Huachipato, located in Talcahuano, about 310 miles (500 kilometers) south of Santiago, had earlier suspended operations in March, demanding the imposition of the new tariffs on Chinese steel to continue operations.
In the last two decades, China has increased its share of the world steel market from 15 percent to 54 percent, according to the Latin American Steel Association (Alacero).
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