Takeaways of the “14th Five-Year Plan for Circular Economy Development” for the Steel Scrap Industry

SHANGHAI, Aug 11 (SMM) - The National Development and Reform Commission (NDRC) issued the “14th Five-Year Plan for Circular Economy Development” in July, and a resource recycling industry system will be basically established in 2025. By then, utilisation of steel scrap will reach 320 million mt. Based on the current annual consumption of steel scrap of about 230 million mt, the steel scrap market will grow by 40% within five years.

To build a recycling system for urban wastes: Recycling systems of urban wastes will be built in 60 cities, with the focus on municipalities directly under the central government, provincial capitals, sub-provincial cities, and the cities with large populations. Processing and utilisation bases of renewable resources will be planned and constructed to promote the classified utilisation and centralised treatment of steel scrap, non-ferrous metals scrap, motor vehicle scrap, waste home appliances and other urban wastes, in order to facilitate cluster development of the projects. The government will encourage key urban clusters such as the Beijing-Tianjin-Hebei, the Yangtze River Delta, the Pearl River Delta and Chengdu to build regional renewable resource processing and utilisation bases.

To strengthen fiscal, taxation and financial policy support: China will coordinate existing funding channels and strengthen support for major projects, key projects and capacity building of the circular economy. It will increase its green procurement and actively purchase renewable resource products, implement preferential tax policies for the comprehensive utilisation of resources, and expand the scope of the preferential list of corporate income tax for environmental protection, energy conservation and water conservation. The government will also encourage financial institutions to increase investment and financing of major projects in the field of circular economy, strengthen the innovation of green financial products, and increase the support of green credit, green bonds, green funds, and green insurance to enterprises and projects related to the circular economy.

SMM comments: At present, the steel scrap industry receives scarce investment and financing, and it is very difficult to get loans. A big issue in the steel scrap industry is the lack of input invoices, while downstream steel mills need large value-added tax invoices. Scrap traders may conduct illegal actions such as false invoices if they are not careful, and thinking of operations in places with highly preferential tax policies will cause unfair competition. Although the steel scrap industry has developed rapidly in recent years, many large state-owned enterprises still dare not enter the market due to the tax issues. In recent years, China Association of Metal Scrap Utilisation has been proposing to increase the tax rebate ratio for enterprises recognized by the Ministry of Industry and Information Technology. If the steel scrap industry want to be further supported by financial capital, the tax issue must be resolved, and the steel scrap futures must be listed with fair prices before they can get credit from the bank.