Chinese scrap processors welcome re-introduction of 30% rebate on tax

BEIJING (Scrap Monster): The Chinese Ministry of Finance and the State Taxation Administration issued a statement, by which selected scrap processors will receive 30% rebate on the 17% value-added tax (VAT) for processing ferrous scrap. The decision has been widely welcomed by steel mills across the country. The rebate will be applicable to wide range of recyclables including metals, plastics and paper. The new rates will be effective July 1^st.

According to reports, only nearly 130 scrap processors in the country in the approved list provided by Ministry of Industry and Information Technology will be eligible to receive the rebate. The rebate would be worth nearly Yuan 70/mt ($11.28/mt), based on prevailing market price of heavy melting scrap in the Chinese eastern region. According to China Association of Metal Scrap Utilization (CAMU), the re-introduction of rebate is a result of constant lobbying. The rebate rate of ferrous recyclers which stood at 70% in 2009 was cut to 50% in 2010 and was scrapped altogether in 2011.

As per CAMU officials, market participants would continue to enjoy preferential tax breaks as part of agreements reached between local governments and companies. The state authorities which raised serious concerns with respect to irregular tax arrangements had later softened their stance on the issue.

Meantime, steel mills and scrap processors have welcomed the decision. Adding that the decision has come late, they also noted that the rebate is so small to offset their losses. The rebate would lead to re-negotiation of purchase price, but may not yield significant benefits as long as the steel market continues to remain weak.

Major scrap consumers in Eastern China have reduced the scrap buying prices by Yuan 30/mt last week on the back of falling rebar prices.