China to eliminate import tax on thermal coal, says Australia
Beijing introduced a 6% tax on all thermal coal imports with little advance warning in October 2014, and went on to lower its rate on Australian-origin thermal coal to 4% in December 2015, and then to 2% effective January 1, 2016.
"Under China-Australia Free Trade Agreement (ChAFTA) commitments, this tariff is scheduled to be fully eliminated (cut to 0%) for Australian-origin thermal coal on January 1, 2017," said a spokeswoman for the Australian government's department of foreign affairs and trade in an emailed response to S&P Global Platts' questions.
"Prior to the China-Australia Free Trade Agreement coming into force, China's general import tariff for [thermal coal] was 6%. Under ChAFTA commitments, this rate has already been reduced twice for Australian-origin thermal coal, to now sit at 2%," said the department of foreign affairs and trade.
Chinese buyers successfully resisted paying the import tax, and pushed its deadweight cost on to the seaborne market where it weighed on prices of Australian thermal coal, ultimately being largely absorbed by Australian shippers as an additional cost.
Market participants will be watching to see how prices in the Chinese seaborne market react to the lifting of the import tax, and whether CFR South China prices rise by an equivalent amount, about $1.50/mt.
In Asia trade Wednesday, Platts assessed the CFR South China price of 5,500 kcal/kg NAR Australian thermal coal for delivery to China in January at $75.30/mt, down 30 cents from Tuesday. ■
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