Coal news and updates

China will impose a 3% tax on imports of coking coal and anthracite products starting October 15, the Ministry of Finance said Thursday.

 

The move is expected to help China's mining sector compete with imports.

 

The state council approved the reinstatement of the tariff along with 3-6% tax for other coal categories, according to a notice on the ministry's website. The statement did not say whether coals of certain specifications or origins would be excluded.

 

Coking coal is a crucial ingredient in the steelmaking process, and anthracite is a cost-efficient substitute for coke in processes such as sintering, pelletizing and pulverized coal injection.

 

Initial reactions to the news were mixed, with Chinese and Australian market participants unsure whether or how this would impact seaborne prices.

 

"We've been competing on a landed cost basis, so theoretically the sellers should absorb the new cost," a miner said, adding that the market was more balanced currently and that time would tell.

 

A Chinese trader, meanwhile, said domestic coking coal supply was tightening due to recent production cuts, so buyers might not be in a position to refuse higher landed prices.

 

"This could be a big blow for importers -- widening the current price disadvantage of seaborne coals to domestic material," a Shanghai trader said.

 

"Short-term, it'll mean a hit. We have to negotiate with our buyers," a Singapore-based mining executive said, adding that he was traveling to China next week to do so.

 

"Longer-term, it should lift domestic prices," he said.

 

The news "wasn't pleasant" for a second miner who said he anticipated that most of the cost would be borne by seaborne coal producers.

 

"I wonder how traders with positions will deal with it," he said. "I guess they'll have to bear it."

 

He did say, however, that he hoped that domestic miners would react by lifting their domestic prices, which could limit the downside impact of the tax on seaborne sellers.

 

An Indian coking coal buyer described the tax as "good news" because he thought the move might dampen global FOB seaborne prices.

 

After several years of price declines following record Australian floods in 2010-2011, the seaborne coking coal market has been extremely steady recently, with premium hard coking coal trading within a $5/mt range for the last seven months at $120.50-126.75/mt CFR China, according to Platts data.

 

China overtook Japan as the world's largest seaborne importer of coking coal in 2013. Most imports are bought on a spot basis, giving China an important say in setting seaborne prices.

 

 

Source: Platts