China Copper Scrap Imports May Fall in April on New Customs Rule

Mar 22, 2010 05:31 GMT   Source: Reuters

HONG KONG, March 19 (Reuters) - Copper scrap shipments to China may fall in April as a new customs rule to fight duty evasion takes effect and demand falls as the government tries to cool a construction boom, industry sources said on Friday.

The rule, effective April 1, requires importers to provide grades of metal scrap content on customs documents based on specifications in the international market, a circular posted on the Chinese Customs website showed. 

Traders said the new rules may prompt more refined copper demand by the world's top consumer as scrap dealers consider their costs anew.

Some importers misreport the metal content of scrap to reduce payments under a 17 percent value-added tax and the new rule aims to stop that practice by covering imports of copper as well as aluminium, zinc , steel and stainless steel.

"That would have some impact on scrap imports in the short term," said a manager at a fabricating plant in Guangdong province, which imports aluminium and copper scrap.

Importers would also no longer be able to choose ports housing friendly customs offices to ship through due to the nationwide requirement, the plant manager added. "That means a fair playing field for importers."

GUANGDONG

Guangdong, home of dozens of metals processing plants, is a prime destination for scrap copper which is popular with fabricators because it is cheaper than refined copper supplies.

Last year, tighter customs screening at Guangdong drove driven down copper scrap imports 28 percent from a year earlier.

But customs in Guangdong has cut back inspections since January of this year by roughly half compared with almost all shipments last year, traders said, adding the reduced inspections cut handling fees paid by importers by about 10 percent.

Strong copper prices MCU3 MCU0, which set the value of copper scrap to China, are also directly related to scrap import volumes.
 
An analyst said China's arrivals of copper scrap had increased between late February and early March as a result of fewer customs inspections and higher spot bookings caused by attractive margins in January and early February, which could raise March's imports from the previous month.

TIGHTER BANK LENDING A WORRY

But a copper scrap trader in the eastern port city of Ningbo, who estimated copper scrap imports at 300,000-350,000 tonnes this month from 280,000 tonnes in February, said demand from Chinese fabricators had not fully picked up after the Lunar New Year break.

He added that fabricators were cautious about the property sector, a target Beijing aims to cool it down by tightening bank lending.

"Tighter lending means importers have lower cash flows, which discourage them from placing orders," a trader selling copper scrap to China, said, adding some importers were holding larger copper scrap stocks and therefore not keen to book new shipments.  
 

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