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China will scrap an export duty of 40% on metallurgical coke, a steelmaking raw material, from next year, an official with the Ministry of Finance said, in a move that could boost Chinese exports to compete with overseas sellers.
China used to be the world's largest exporter of coke, but its exports have almost dried up since 2008, when Beijing raised the export duty from 25% in a bid to reduce pollution.
"There will be no export tariff (for coke) starting from 2013," said the official, who declined to be identified as he was not authorised to speak to media.
The move to scrap coke tariffs followed a ruling by the World Trade Organisation in July last year that China's export curbs on several raw materials breached free-trade rules. The body has set a deadline of December 31 for Beijing to act.
Still, it is not clear if Beijing will adjust the export quota for producers and traders, although analysts said there was little need to do so, since actual shipments have been far lower than the annual cap.
The 2012 quota was set at nine-million tons but total exports of coke and semi-coke in the year to October were only 907 000 tons, a fall of 71% from year ago. Annual exports stood at around 15-million tons between 2000 and 2007.
Scrapping the hefty export tariff would boost the competitiveness of Chinese supplies and could increase China's consumption of coking coal.
"The removal of the export duty means our coke price can be $70-80 a tonne lower than overseas suppliers. Buyers from South Korea and Japan may return to buy from China again, which will be good for exports," said Ma Cheng, an analyst with Galaxy Futures in Beijing.
Coke prices from China's port of Tianjin are hovering around $400 a tonne on a free-on-board basis. The export tariff abolition could take prices down to around $285, analysts said.
China's coke producers, now operating at around 70% of capacity, would be likely to ramp up production as foreign markets become more accessible. This would in turn boost consumption of coking coal, said Helen Lau, a senior analyst at UOB-Kay Hian.
Still, an increase in coking coal demand will mostly benefit Chinese and Mongolian coking coal producers as most Chinese coke ovens are located in the inland provinces of Shanxi and Hebei, which makes Australian and US imports uneconomical, Lau said in a note.
Metallurgical coke is largely used as a fuel in blast furnace steel production.
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