China to Abolish Tariffs on US Metal Scrap Imports

China plans to waive tariffs it imposed on some US-origin goods in response to Washington's Section 301 tariffs, and metal scrap including copper, aluminum and steel is among the items on the duty exclusion list, according to a February 19 announcement from China's Ministry of Finance (MoF). However, Chinese market sources expected the measure's effect on the country's metal market to be limited.

Before the new announcement, China had imposed 5% duties on US-origin aluminum and copper scrap, while steel scrap from the US was hit with a much higher 25% penalty, Mysteel Global noted.

Starting March 2, China's domestic enterprises will be able to apply to import the listed products from US free of tariffs, based on the rules of marketization and commercialization. The products include copper scrap (HS code 74040000), aluminum scrap (HS code 76020000) and steel scrap (HS code 72044900), the MoF release showed.

Yet market sources contacted by Mysteel Global Thursday brushed aside suggestions the tariff exemption would have a bearing on China's scrap imports. "The squeeze in our scrap imports is more related to the need for importing enterprises to be government-qualified, rather than on the level of import tariffs," a Beijing-based senior analyst argued. "Until this issue of prior permission to import is resolved, we're not likely to see rises in imports," he added.

Commenting on the news, a market insider based in Southeast China's Jiangxi province agreed, noting that the tariff exemptions on US-origin metal scrap won't be enough by themselves to mitigate the shortage of scrap supplies in the domestic market.

"The Sino-US trade friction had a large influence on scrap import trends from the US, but the key factor governing our scrap trade is the limited import quotas awarded to domestic companies," the source stated. "The tightening environmental restrictions on enterprises, coupled with the declining imports, are what are producing the tight market currently," she argued, saying this was the "root cause" and not trade issues with the US.

Starting July 1 2019, China started to restrain imports of eight solid waste materials including those of aluminum, copper and steel, as part of its efforts to restrict "foreign garbage" flowing into the domestic market, Mysteel Global notes. As of February 6, the country issued an aluminum scrap import quota of 704,158 tonnes in total, according to statistics from China Solid Waste and Chemicals Management Center MEE.

For 2019, China imported 1.39 million tonnes of aluminum scrap, representing a year-on-year decline of 10.9%, and steel scrap imports witnessed a sharper on-year decline of 86.3% to reach 180,000 tonnes, according to data from China's General Administration of Customs.

"Domestic enterprises and associations are striving for a new specific classification for steel scrap but getting this introduced may need some time. We probably won't see much progress during the first half of this year, at least," the Beijing analyst stressed. However, he did offer a tiny flicker of hope.

"Given the negative impact that the virus outbreak is having on the economy, the authorities might take some measures to give business a boost, which may include relaxing some of the barriers to scrap imports," he added.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.