Russia, China trade new copper rod disguised as scrap

Russian Copper Company (RCC) and Chinese firms have avoided taxes and skirted the impact of Western sanctions by trading in new copper wire rod disguised as scrap, three sources familiar with the matter told Reuters.

Copper wire rod was shredded in the remote Xinjiang Uyghur region by an intermediary to make it hard to distinguish from scrap, the sources said, allowing both exporters and importers to profit from differences in tariffs applied to scrap and new metal.

Russia’s export duty on copper rod was 7% in December, lower than the 10% levy on scrap.

Imports of copper rod into China are taxed at 4%, and there is no duty on Russian scrap imports.

The sales of new metal disguised as scrap, which started in December, are reflected in a discrepancy between Chinese and Russian data.

Chinese customs data showed China has bought significantly more copper scrap from Russia since December, while Russian figures Reuters obtained from a commercial data provider showed the amount of scrap exported to its neighbour was negligible.

Asked about the trade in copper rod to Chinese firms, RCC, which is subject to Western sanctions, said that it supplies products only to Russian companies.

China has become a major destination for Russian companies seeking to export their commodities after the United States imposed sanctions on Russia for its invasion of Ukraine in February 2022.

The United States and the European Union have imposed sanctions on Chinese companies for supporting Russia’s war effort in Ukraine.

Shredding newly-made copper wire rod is an effective way to disguise new material that looks very different to scrap.

The new, high-purity copper long, thin rods, mainly used for making power cables, are typically coiled for ease of transport.

Copper scrap, by contrast, is a mix of wires, tubes and pipes that have already been used.

They are chopped into grain-sized pieces or coiled and pressed, like packs of noodles, for transport.

Apart from the financial incentive of avoiding taxes, the shredded metal is harder to identify and trace – making it easier to sell to Chinese manufacturers.

Theoretically, there are no legal obstacles to prevent China from buying metal from Russian firms under Western sanctions, but manufacturers may still be wary of losing export business to buyers seeking to avoid providing any funds to Russia. – Reuters