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China smashes gangs suspected of US$750 million scrap-steel export scam

Hundreds detained in clampdown on non-payment of taxes meant to encourage use of scrap in domestic industry

PUBLISHED : Wednesday, 06 June, 2018, 4:31pm
UPDATED : Wednesday, 06 June, 2018, 10:03pm

China has detained 245 people after a nationwide raid of gangs suspected of illegally selling more than 2.4 million tonnes of steel scrap to buyers across Southeast Asia.

Chinese authorities carried out multiple raids starting Monday morning after an investigation into unusual activity unearthed a network that was shipping scrap without fully paying the 40 per cent export duty, the General Administration of Customs said in a statement on Wednesday.

Some 65 gangs were targeted and the value of the goods is estimated at 4.8 billion yuan (US$750 million).

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The authorities said their suspicion was raised by a sudden increase in the volume of iron and steel scrap exports.

After investigating, customs police moved to break up the ring, which they believe was coordinated by a Chinese company and a Thai company, according to the statement which did not name either firm.

The action follows last month’s detention of 137 people, including an employee of Swiss trading giant Glencore, amid allegations of improper imports of waste products.

Authorities linked the steel scrap crackdown to China’s efforts to enforce broader environmental protections, noting that the export tax was intended to retain scrap for recycling and use in the domestic steel industry.

“Steel scrap is the only substitute for iron ore in the manufacturing of steel products,” the statement said. “The fullest use of iron and steel scrap is not only a necessity to break down resource bottlenecks and build a resource-saving and environmentally friendly society, but also an important way to reduce carbon emissions and alleviate the dependence on iron ore.”

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China’s shipments of steel scrap climbed from almost nothing in 2016 to about 2.2 million tonnes last year, according to customs data. The surge followed a government clampdown on illegal, low-tech plants using scrap to make lesser quality steel. The authorities are now encouraging China’s steel industry to shift to electric arc furnaces, a type of scrap-based steelmaking that accounts for most output in the United States and Europe.