The U.S.-China trade war is now a game of rerouting and risk

Source Cryptopolitan

Some U.S. scrap sellers are routing copper bound for China through Canada, Mexico and Vietnam to sidestep a 10% import duty, people familiar with the trade said.

The use of third-country stops shows how far firms are going to keep shipments moving as tensions between Washington and Beijing disrupt normal routes.

Scrap from the United States feeds China’s copper sector. Because Chinese smelters and refiners turn out about half of the world’s finished copper, any long pause in U.S. deliveries could send ripples through global markets.

The scope of these detours is uncertain, but they point to efforts to trim costs created by new trade barriers and to place excess material from the U.S. The country is the biggest source of waste copper, recovered from car parts, wiring and electronics, yet only around 40% is used domestically, BMO Capital Markets estimates.

“It’s not surprising that these companies come up with clever ways to move materials around,” said Xiaoyu Zhu, a trader at StoneX Financial Inc. “The 10% tariff has put the scrap companies at a disadvantage in terms of pricing, not to mention the financing pressure from high interest rates.”

China’s tariffs shake up export routes

China used to be the main outlet for U.S. scrap copper before the dispute escalated. As reported by Cryptopolitan in May, Beijing has added a 10% counter-tariff on all American imports, including copper scrap, upsetting long-standing flows.

Customs figures underline the shift. China’s intake of U.S. copper scrap slid from 39,373 metric tons in January to under 600 tons in July, the lowest monthly level since records began in 2004. China’s total scrap copper imports held near 190,000 tons in July, little changed from early in the year, as other suppliers stepped in. Cargoes from Japan and Thailand have more than doubled since January, and arrivals from Canada rose 29%.

U.S. export data points in the same direction. In the second quarter, Thailand, India and Canada were the top destinations for American scrap copper.

Bloomberg reported that people familiar with the practice say these spikes suggest some transshipment. The typical method is to load U.S. scrap into containers tagged with the owner’s name and send it first to a third country; at the stop, they switch the tag to a different name and origin, then move the box on to China.

That tactic carries legal exposure.

Emmanouil Xidias, managing director at ship-broker Ifchor North America LLC, said that reloading in transit and altering origin, or declaring a stopover nation as origin before re-export, amounts to fraud. The party that changes the origin and re-exports bears liability, he said.

“Whether the buyer or the seller shoulders the risk depends on the contract terms,” Xidias said. For example, if terms cover cost of goods, insurance and freight, the risk is transferred to the buyer when goods are unloaded at their destination. “If it’s Free on Board, then the buyer takes the risk the moment the materials are loaded to the container.”

China fined copper importers over transshipment in Trump’s first term

China has moved against such activity before. Over the past decade, importers tied to illegal transshipping or origin fraud across various products have faced heavy fines and criminal cases.

During President Donald Trump’s first term, when Beijing also levied tariffs on U.S. goods, some buyers of copper scrap were fined after customs uncovered attempts to procure rerouted cargoes.

U.S. traders say they face a simple choice of keeping stock in yards or shipping abroad to raise cash. Some are opting to sell overseas, but the process is slow and secondary copper piles remain large.

Prices reflect the strain. By late July, the discount for No. 2 copper, a recycled grade used as a cheaper stand-in for primary metal, versus futures widened to the biggest gap since 2015, Fastmarkets data show.

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