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.
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.
