The “silent” removal of a 40 percent tax on China’s coke exports, coming after the World Trade Organization ruled against the practice, will drive up production and boost the nation’s coal imports, analysts said.
Exports of coke, used to make steel in blast furnaces, will jump next year, leading to more demand for the coal used to make the product in coking ovens in China, UOB Kay-Hian Ltd. analyst Helen Lau and researcher Custeel.com’s Mu Wenxin said.
China’s coke exports plunged to about 1 million metric tons this year amid the curbs, from an annual average of 15 million tons between 2000 and 2007. Should exports rebound to that average, demand for coking coal may rise by 20 million tons, benefiting suppliers including Mongolian Mining Corp. (975) and Winsway Coking Coal Holding Ltd. (1733), Lau said.
China didn’t include coke on the official list of export taxes for next year announced this week by the Ministry of Finance. Three calls by Bloomberg News to the ministry’s press office for comment on the removal weren’t answered.
“The tax was removed silently because the nation doesn’t encourage exports of resources,” Mu said, citing his talks with government agencies on the issue.
The export taxes prompted complaints from the U.S. and the European Union. The WTO on Jan. 30 rejected China’s appeal of a ruling that found restrictions on exports of nine raw materials including coke, zinc and bauxite break trade rules and give the country’s manufacturers an unfair edge over competitors.
“Coking coal producers in Mongolia and China itself are likely to benefit more than the Australian and U.S. exporters from the tax removal, because those mines are closer to coking ovens in inland provinces like Shanxi and Inner Mongolia,” Lau said by phone.
Mongolia Mining, also known as MMC, traded 1.3 percent lower at HK$3.71 at 11:26 a.m. in Hong Kong today. Winsway, which processes and moves coal to China from Mongolia, fell 1.5 percent to HK$1.28. The price of coke shipped from China’s Tianjin port may drop to $285 a ton from the current $401, making it affordable for Japanese users, Lau estimated.
China, which began limiting coke shipments in 2004, also has an export-license and quota system to help safeguard supplies for its domestic steelmakers and protect the environment. Coke is made from coking coal in a process that releases chemicals including benzopyrene, which can cause cancer. The nation may also scrap the export quota starting from next year, Custeel’s Mu said.
China’s coke exports plunged 70 percent to 960,000 metric tons in the first 11 months of this year from a year earlier, according to the General Customs bureau. Coking coal imports totaled 40.2 million tons in the first 10 months, according to data compiled by Bloomberg.
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