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Copper controversy: Russia, China profit from passing the metal off as scrap

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A recent report from Reuters has exposed a scheme between Russia and China involving copper, a metal expected to skyrocket in value and hit record highs next year. Once the Russian metal arrives, Chinese companies are shredding these copper rods down to disguise them as scrap.

This is because of the difference in tariffs between these two products. Copper is cheaper to export in Russia than scrap, which is why the materials leave the country untouched. In China, copper import rates are much higher than scrap, so when the metal is received, it is then shredded into scrap before being taxed.

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This process helps both sides skirt taxes and minimize the impact of Western trade sanctions.

The initiative started in December of 2023, where a massive spike in Chinese imports of Russian scrap can be observed. During that month, China imported 6,607 tons of copper scrap from Russia, but export records on Russian goods indicated the country only sent 73 tons to Chinese companies. This means millions of pounds of copper were actually shredded down and passed off as scrap after the fact.

Despite the stark data discrepancy, the reason this scrap scheme went unnoticed for so long is because of where it has been taking place. The copper wire is being shredded in China’s remote Xinjiang Uyghur region, a place infamous for its human rights abuses.

Beijing has faced international condemnation for its persecution of the Uyghur people. In response to the criticism, China has restricted access into the region, making it difficult for oversight to prevent things like the disguising of copper as scrap.

However, some Chinese manufacturers are now anonymously blowing the whistle on this metallic deception. They are speaking out against the scheme because it is putting their reputations and profits on the line.

When copper is altered to make it look like scrap, doing so also makes it harder to trace the material’s origin, offering a way around American and European bans on Russian exports in repose to Moscow’s invasion of Ukraine. Ultimately, this allows Russian copper to be sold in various products to people in the U.S. and Europe, a dangerous prospect for manufacturers who could be held liable as this scheme comes further into light.

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[JACK ALYMER]

IT’S LIKE TRYING TO PASS OFF A PRIME CUT STEAK

AS GROUND BEEF.

AND GETTING PAID MORE FOR IT.

CHINA AND RUSSIA ARE DOING THIS, BUT WITH COPPER.

THE METAL IS BEING CONVERTED INTO SCRAP, MAKING MORE MONEY FOR BOTH SIDES IN THE PROCESS.

HERE’S HOW IT WORKS.

RUSSIA SENDS CHINA COPPER, A METAL EXPECTED TO SKYROCKET IN VALUE AND already hitting record highs.

ONCE IT ARRIVES, CHINESE COMPANIES SHRED THESE COPPER RODS DOWN – DISGUISING THEM AS SCRAP.

THAT’S BECAUSE OF THE DIFFERENCE IN TARIFFS BETWEEN rare metals and metal junk.

COPPER IS CHEAPER TO EXPORT IN RUSSIA THAN SCRAP, WHICH IS WHY THE METALS LEAVE UNTOUCHED.

BUT IN CHINA, COPPER IMPORTS ARE TAXED HIGHER THAN SCRAP.

SO WHEN THE METAL IS RECEIVED, IT’S THEN SHREDDED INTO SCRAP BEFORE BEING TAXED.

THIS PROCESS HELPS THE TWO NATIONS SKIRT TAXES AND MINIMIZE THE IMPACT OF WESTERN TRADE SANCTIONS.

IT ALL STARTED IN DECEMBER OF LAST YEAR, WHEN A MASSIVE SPIKE IN CHINESE IMPORTS OF RUSSIAN SCRAP CAN BE SEEN.

DURING THAT MONTH, CHINA IMPORTED MORE THAN SIX-AND-A-HALF-THOUSAND TONS OF COPPER SCRAP FROM RUSSIA.

BUT RUSSIAN EXPORT RECORDS INDICATED THE COUNTRY ONLY SENT 73 TONS TO CHINA.

MEANING MILLIONS OF POUNDS OF COPPER WERE ACTUALLY SHREDDED DOWN AND PASSED OFF AS SCRAP AFTER THE FACT.

DESPITE THE STARK DATA DISCREPANCY, THE REASON THIS SCRAP SCHEME WENT UNNOTICED FOR SO LONG IS BECAUSE OF WHERE IT’S TAKING PLACE.

THE COPPER WIRE IS BEING SHREDDED IN A REMOTE REGION OF CHINA THAT OFFICIALS HAVE RESTRICTED ACCESS TO.

IT’S A PLACE WHERE THE CHINESE GOVERNMENT HAS FACED INTERNATIONAL CONDEMNATION FOR ITS PERSECUTION OF THE UYGHUR PEOPLE.

SO CHINA SHUT THE OUTSIDE WORLD OUT, MAKING IT DIFFICULT FOR OVERSIGHT TO ADDRESS THINGS LIKE THE DISGUISING OF COPPER AS SCRAP.

BUT SOME CHINESE MANUFACTURERS ARE NOW ANONYMOUSLY BLOWING THE WHISTLE ABOUT THE PROBLEM.

REUTERS WAS THE FIRST TO REPORT ON THE METALLIC DECEPTION. THOSE MANUFACTURERS SAY IT’S PUTTING THEIR REPUTATIONS AND PROFITS ON THE LINE.

WHEN COPPER IS ALTERED TO MAKE IT LOOK LIKE SCRAP, DOING SO ALSO MAKES IT HARDER TO TRACE TO THE POINT OF ORIGIN.

THIS OFFERS A WAY AROUND AMERICAN AND EUROPEAN BANS ON RUSSIAN EXPORTS IN REPOSE TO MOSCOW’S INVASION OF UKRAINE.

ULTIMATELY ALLOWING RUSSIAN COPPER TO BE SOLD IN VARIOUS PRODUCTS TO PEOPLE IN THE U.S. AND EUROPE.