(Bloomberg) -- The Shanghai Futures Exchange has suspended the settlement of copper and aluminum futures with deliveries from duty-free warehouses, a mechanism that has long helped Chinese traders avoid paying taxes on metal that can be sold overseas.
Introduced in 2010, the bonded stockpiles give Shanghai traders the flexibility to sell their metal to international markets when overseas prices are attractive, and send it through Chinese customs and pay value-added taxes only when importing is worth the costs.
The exchange on Thursday announced it would halt the bonded delivery business for copper and aluminum futures, effective immediately. The SHFE informed market participants that the decision was due to dwindling interest in the businesses, two people familiar with the matter said, asking not to be named discussing non-public information.
The exchange didn’t immediately respond to a request for comment outside of regular business hours.
Activity with bonded deliveries picked up in 2018 when an export window opened up, but otherwise, those warrants are typically costlier and less liquid.