China Revamps Commodity Tariffs to Balance Supply amid Slowdown

  • Thursday, December 18, 2014

  • Keywords:ferronickel FeNi trade tariffs
[Fellow]The 1-percent import tax on ferronickel was removed and inbound shipments of copper and aluminum will remain duty-free.

CHINA cut tariffs on coal exports to ease a glut while axing import duties for ferronickel amid a shortage as the world’s biggest consumer of energy and metals seeks to balance its supply of raw materials.

Tariffs on coal products, including lignite, anthracite and coking coal, will fall to 3 percent starting 2015 from this year’s 10 percent, the Ministry of Finance said in a statement on December 17.

The 1-percent import tax on ferronickel was removed and inbound shipments of copper and aluminum will remain duty-free.

China adjusted trade tariffs for next year as surpluses of raw materials emerge while the economy slows in the top consumer of energy, metals, pork and soybeans. The country is on pace for its weakest full-year expansion since 1990, contributing to a fourth annual decline in the Bloomberg Commodity Index, the longest slump since the measure was created in 1991. “In the case of coal, China now has too much and needs to export its surplus to reduce pressure on the domestic market,” David Fang, a director with China Coal Transport and Distribution Association, said by phone from Beijing on Wednesday. “It’s still in China’s best interests to encourage imports of those low-cost resources that it needs.”

China became a net coal importer in 2009 after purchases from overseas more than tripled as domestic supplies couldn’t keep pace with its expanding economy.

Efforts to raise domestic coal-production capacity in response are now causing a glut in the local market, according to Fang.

Coal exports

MORE than 70 percent of China’s coal miners are unprofitable and half are delaying or cutting wage payments because of falling prices caused by overcapacity and sluggish demand, the China Coal Industry Association said in July. The government, which has urged the nation’s 14 largest producers to cut production by 10 percent this year, also banned the import of lower-quality coal.

“This is another move by the government to aid the struggling coal industry,” Lin Xiaotao, a coal analyst with ICIS-C1 Energy, a Shanghai-based consultant, said by phone from Guangzhou. “But local coal prices aren’t really competitive with overseas rates, so the effect of this policy is seen limited.”

China’s ferronickel imports may rise next year in response to the removal of the tariff, according to Celia Wang, an analyst at Beijing Antaike Information Development Co., a nonferrous metals research firm.

Ferronickel is an alloy of iron and nickel, mainly used to produce steel. It has a higher metal content than nickel pig iron, a cheaper alternative produced in China.

Ore ban

THE tariff adjustment comes as the country’s supply of nickel ore is falling after an export ban by Indonesia, the world’s largest producer of unrefined nickel, went into effect in January.

The Philippines has since replaced Indonesia as the biggest supplier.

Imports of the raw material by China dropped 25 percent to 42.4 million tons in the first 10 months of the year from a year ago, with Philippine ore accounting for 74 percent of the total, customs data show.

Nickel prices have climbed 15 percent this year.

They may extend their rally into 2015 as China’s output of nickel pig iron falls amid dwindling stockpiles of higher-quality raw material, according to Ian Roper, a Singapore-based commodity strategist at CLSA Ltd., a broker and investment group.

  • [Editor:Juan]

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