Full Phase-out of Non-Compliant Open-Air Scrap Steel Yards Starting July 1

According to the latest update, the 2026 revised Code for Construction and Management of Renewable Resources Collection Sites will take full effect on July 1. Many scrap steel operators still hold out false hope, assuming this will be another perfunctory campaign-style inspection. However, judging from recent rectification efforts across regions, market data from Fubao Information, as well as law enforcement trends of tax and environmental protection authorities, the new regulations will be strictly enforced. Unregulated individual operators, small open-air yards and pure invoice arbitrage traders will be phased out in a large scale.

Key Point 1: Unauthorized open-air yards and scattered sites to be shut down; tax rebates revoked for substandard environmental compliance

Research data from Fubao shows that China has a vast number of renewable resources collection sites. A large number of individual operators and small yards have prominent problems including open-air stockpiling, unpaved ground, lack of anti-seepage and dust suppression facilities, and mixed storage of hazardous waste, resulting in a high proportion of non-compliant sites. After the new rules take effect in July, unregistered sites with improper locations and substandard environmental performance will be directly closed and cleared.

Meanwhile, qualified enterprises failing environmental inspections will lose access to the 30% VAT refund policy. Their profit per ton will drop sharply and core competitiveness will be weakened, leaving individual operators with dwindling room for survival. Recent shutdown orders for small open-air yards in Jiangsu and Shandong provinces serve as a clear warning.

Key Point 2: Full processing equipment mandatory; pure invoice arbitrage no longer viable

The new regulations stipulate clearly that medium and small-sized scrap steel bases must be equipped with shears, crushers, balers, intelligent weighing systems and traceability account devices. Pure trading businesses that merely resell goods without actual processing and engage in invoice arbitrage are strictly prohibited.

Previously, many traders profited from invoice transfers and capital turnover without conducting sorting or processing work. Under the new rules, enterprises without processing capacity will be excluded from tax rebates. Steel mills will also prioritize cooperation with compliant processing bases, leaving pure trading models with drastically limited living space.

Key Point 3: Full-process traceability and complete purchase and sales records are mandatory

All scrap steel collection, processing and sales steps need full and clear purchase and sales records. Businesses must write down detailed information including supply sources, weight, origins, delivery destinations and invoice numbers. These records must track every step of the business and be kept for at least three years.

The Fourth Phase of the Golden Tax Project uses big data for strict supervision. Many irregular behaviors will easily cause official inspections. These behaviors include large cash deals, unclear supply sources, incomplete records and incorrect reverse invoicing. Minor violations will lead to fines, and serious ones will result in criminal punishment.

There is only one month left before the official implementation on July 1, leaving little time for rectification. Operators are advised to promptly carry out yard ground hardening, upgrade environmental protection facilities, complete supporting processing equipment, improve traceability ledgers, standardize invoicing procedures, and actively connect with steel mills on the MIIT whitelist.

The scrap steel industry will bid farewell to the extensive, scattered and disorderly development model, and accelerate toward large-scale, standardized and intensive operations. Non-compliant individual players will be gradually eliminated, while compliant processing bases will gain greater industry influence. A major industrial reshuffle has begun. Only those who take the initiative to achieve compliance can gain a firm foothold in the market.