China sets tax on low-grade coal imports; Indonesia unaffected

Reuters

* 3 pct tax set on lignite imports from some countries

* Lignite exempted from import tariffs under China-ASEAN FTA

* Indonesia accounted for 97 pct of China's lignite importsin Jan-July (Releads, adds comments from customs official)

By Fayen Wong

SHANGHAI, Sept 2 (Reuters) - China has announced a 3 percenttax on imports of steam coal with low calorific value but themove will have no impact on top supplier Indonesia as a tradedeal with Southeast Asian nations will ensure that thoseshipments continue to enjoy zero tariff.

Indonesia is the biggest seller to China of lignite, a formof low-grade coal, with its shipments accounting for 97 percentof China's total lignite imports in 2013 up to end of July.

Indonesia's exemption from the tariff means the tax wouldhave minimal impact on China's overall coal imports. Localminers, such as Shenhua and China Coal,will need to fend for themselves as they fight against cheaperimports.

China's State Council, the country's cabinet, last weekapproved a plan to implement a 3 percent tariff on ligniteimported from countries under the most-favoured nation tradestatus, according to a statement from the finance ministry.

The new tax rule came into effect on Aug. 30, according tothe statement. Lignite currently enjoys zero import tariff.

(For more details, click on: http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201309/t20130902_984053.html)

The statement did not specify what grades of lignite, interms of heating value per kilogram, would be affected, althoughindustry sources said Chinese customs statistics classify coalwith a calorific value of between 3,800-4,200 kcal/kg aslignite.

A customs official said the new regulation will not affectexporters from Indonesia or other countries that are members ofthe Association of Southeast Asian Nations (ASEAN), as aChina-ASEAN free-trade agreement has brought import tariffs forlignite to zero since the start of 2012.

"The 3 percent tax will only be applicable to exporters thatare outside of the ASEAN group," said the official who was notauthorized to talk to the media and thus did not want to beidentified, adding that shippers will also need to provide acertificate of origin.

Traders said most miners and trading houses are able toprovide such documents so the requirement would have littleimpact on shipments.

Non-ASEAN countries that export lignite to China includeAustralia, North Korea, Russia and Mongolia, according tocustoms data. Those countries account for just about 4 percentof China's lignite imports.

Beijing's move to tax imports comes after the domestic coalassociation lobbied the government in May to ban imports of alllow-grade coal, citing the impact on local miners.

"The coal industry was making a lot of noise and wantingBeijing to help the local miners but the government knows thatChinese miners need to be more cost effective," said CaoZhongfang, an analyst with industry portal SXCOAL.com.

China imported 187 million tonnes of coal, includinglignite, in the first seven months of 2013. Total ligniteshipments stood at 35.97 million tonnes during the period, upabout 12 percent from year ago.

With imported lignite currently priced at about $47 a tonneon a landed basis, the newly imposed tariff would add about 8yuan ($1.31) a tonne to its cost, industry sources said.

Still, China's major coal producers have been slashingdomestic prices since July to gain market share, in a movelikely to slow import growth for the rest of the year asoverseas shipments become less attractive in the top buyer andproducer of the fuel.

Domestic coal, with a heating value of 5,500 kcal/kg, fell 7yuan from a week ago to 546 yuan ($89.21) per tonne, accordingto the Bohai-Bay Rim Steam Coal index. Prices have alreadydropped 14 percent this year.($1 = 6.1195 Chinese yuan) (Additional reporting by Viriya Paramita; and Michael Taylor inJAKARTA; Editing by Muralikumar Anantharaman)

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