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Possible two-year wait for China to eliminate thermal coal import tariff

Australian thermal coal shippers such as BHP Billiton, Glencore, Peabody Energy and Rio Tinto may potentially have to wait until June 2017 for China to eliminate its 6% tariff on imports of Australian thermal coal, the Australian government said in a statement Wednesday.

Marking the official signing of Australia's free-trade agreement with China Wednesday, the statement issued by Canberra said: "The tariffs on coking coal will be removed on day one, with the tariff on thermal coal being phased out over two years."

Beijing introduced a 6% tariff on Australian thermal coal arriving in Chinese ports last October, and importers in China have effectively passed its cost back to coal shippers in Australia.

At the same time last year, China imposed the 3% import tax on Australian coking coal imports that is now being lifted.

The import tariff has shielded China's domestic coal industry from the competitive threat of seaborne-traded thermal coal from Australia -- China's largest supplier -- and other exporters such as Russia and South Africa. Indonesian thermal coal is exempt from China's import tax because of a pre-existing free trade deal.

Australia shipped A$9.3 billion ($7.2 billion) worth of coal exports to China in the fiscal year 2013-14, comprising around A$5.9 billion of coking coal and A$3.5 billion of thermal coal.

The China-Australian Free Trade Agreement is billed as a launchpad for increased trade between the two countries, the value of which totaled A$160 billion in fiscal 2013-14, the Australian government in its statement.

"On day one of the China-Australia Free Trade Agreement, more than 85% of Australian goods exports will be tariff free, rising to 95% on full implementation," it added.

China has agreed to immediately remove tariffs on some resource products such as its 8% tax on Australian aluminum oxide, which will benefit Australian exporters to the tune of A$1.3 billion a year, the Australian government said. Tariffs on Australian manufactured goods such as automotive engines and pharmaceuticals are also being phased out by China.

Canberra has in the past year implemented free-trade agreements with Japan and South Korea which, together with the latest one with China, mean 55% of Australian exports are now covered by such agreements.

source: http://www.platts.com