Good news for Coal Should, page-3

China removes 3% duty on Australian coking coal imports after FTA inked
Melbourne (Platts)--17Nov2014/441 am EST/941 GMT

Australian coking coal producers have regained their competitive advantage after a Free Trade Agreement inked between China and Australia in Brisbane on Monday afternoon saw the immediate removal of the 3% duty on coking coal imports.

Thermal coal, however, did not do as well in the FTA, with Chinese buyers still required to pay a 6% import duty in China for Australian material for another two years -- an indication perhaps that China has plenty of thermal coal whereas appetite for good quality steelmaking coal remains strong.

"The tariffs on coking coal will be removed on day one, with the tariff on thermal coal phasing out over two years," Australian Prime Minister Tony Abbott said in a statement.

Beijing imposed the coal import tariffs on October 15, ostensibly as a means of supporting China's domestic coal sector. Some market watchers in Australia suggested the tariffs were introduced to provide some bargaining ballast in the FTA discussions.

One Australian metallurgical coal miner cheered the removal of the import tariff on coking coal, saying it would help make Australian material more price-competitive against not only Chinese domestic material, but also against competing exporters without an FTA in place with China.

"Our products will be cheaper than those from Canada and Russia," the miner source said.

Rio Tinto chief executive Sam Walsh welcomed the FTA, saying China was one of the miner's "most important customers."

"Rio Tinto and the Australian resources sector more broadly has played a role in building the relationship between Australia and China," he said.

Commonwealth Bank of Australia analyst Lachlan Shaw said the removal of the import tariff could only be good for Australian coking coal producers but cautioned that demand was still weak.

"Steel output in China doesn't look good and there is still growth in domestic coking coal," he said.

A Chinese trader doubted the removal of the tariff would have much impact on coking coal prices.

"When met coal tariffs were implemented, seaborne prices hardly moved, so I'm expecting the same this time as well," the source explained.

Export volumes from Australia would most likely recover, the source added, but noted more supply would mean that "prices can't go up."

Another Chinese trader was more bullish.

"If you don't increase your offer price after the tax removal, you're implying that prices have fallen," he said, believing spot prices would increase in the short term.

The extent of the impact of the 3% import tariff on Australian coking coal imports to China is not yet clear as October data has yet to be released.

Chinese steel mills and traders appreciate the higher quality coking coal produced in Australia but will only import it when its price is on par with, or cheaper than, domestic coking coal.

In the year to end September, China imported almost 21 million mt of metallurgical coal from Australia out of total imports of 44.4 million mt.