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Chinese smuggling gangs discovered exporting scrap metal illegally

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China has arrested 245 people for allegedly being members of smuggling gangs that illegally exported steel scrap worth 4.8 billion yuan (US$750 million) to southeast Asian countries.

Argus Media revealed that security personnel began making arrests on 5 June across China after customs officials observed a sharp increase in steel scrap exports declared at low prices to avoid paying the full 40% export tax, China's General Administration of Customs (GAC) said on 6 June.

A preliminary investigation found smuggling gangs headed by an unnamed Chinese company and a Thai company exported around 2.41 million t of steel scrap to Vietnam, Thailand, Singapore, Malaysia and Indonesia. Around 65 gangs were broken up with arrests and raids conducted in Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Hunan, Fujian, Guangdong, Guangxi and Hainan provinces.

The arrests quieted export trade for billet and wire rod because it raised fears of investigations into these products. In China, exporters can be tempted to declare billet as square bar to avoid a 15% export tax and instead receive a 13% tax rebate, and non-alloy wire rod declared as alloy wire rod would receive a 9% rebate.

"Billet exports are likely to stop for a while, as no-one dares to quote and export when the investigation is continuing," a Tangshan exporter said.

Officials said the crackdown is part of China's environmental efforts. Steel scrap is the only raw material that can be substituted for iron ore in the steelmaking process, "and full use of iron and steel scrap is not only an inevitable requirement to break down resource bottlenecks and build resource-saving and an environment-friendly society, but also an important way to reduce carbon emissions and alleviate dependence on iron ore," the GAC said.

China's steel industry produced more than 800 million t of crude steel last year using more than 1 billion t of iron ore imports, around 250 million t of 62% Fe equivalent domestic iron ore and around 150 million t of steel scrap. China is reducing its iron ore mining on environmental concerns. Beijing said last year that a third of the country's iron ore mining leases would not be renewed, and this week shut down 226 non-coal mines this week including a number of iron ore mines.

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