Policy

China to remove 40% export tax on metallurgical coke from Jan 1, 2013

Date Dec 18 2012 10:11:45

China will remove the 40% duty on the export of metallurgical coke from January 1, 2013, an announcement posted on the finance ministry's website showed Monday.

Coal-based coke and semi-coke, used in steelmaking, has been removed from a list of goods attracting export duty in 2013, according to a statement by the Customs Tariff Commission of the State Council dated December 10.

Market participants said China's coke export quotas have also been removed at the same time, although the Ministry of Finance couldn't be reached for comment. The Ministry of Commerce, which is also involved in setting trade policy, declined to comment on the matter.

COKE RETHINK

Two recent buyers of coke via tenders said Monday they were considering whether they should renegotiate contracts as there was a possibility of cheaper offers being made after the announcement.

"Then what would happen to my spot deals?," said a Southeast Asian end-user who bought coke recently.

Coke buyers would now seek lower prices for coke as a result of the news, said another source at an Indian mill, adding that he would demand a Rupees 800-900/mt ($14-16/mt) drop if he were to buy from the spot market today.

Domestic coke prices in India would also face downward pressure from more competitively priced imports, he added.

Sources at Indian coke producers expressed anxiety after hearing about the confirmation of the removal of Chinese coke tax.

"I don't know and I can't understand which direction it will go," one of them said. "Domestic coke prices are already under tremendous pressure but I don't know what it will become," he said, conceding that domestic coke prices would be negatively impacted.

"There will be pricing pressure on Japanese and Colombian coke producers," he said. "Russian producers will also have a tough time now."

Indian cokemakers "will have to give a good price rebate to remain competitive" in view of potentially cheaper imported material, he added.

A source at a Russian coke producer said he expected prices of seaborne coke to drop to $260-270/mt CFR India from current $288/mt levels as a result of the duty removal.

"Tough competition will cause a drop in spot prices," he said. "There is too much coke in the market."

SOME SKEPTICAL

Some were less sure that the policy would directly translate into China's return as a major coke exporter.

A Beijing-based trader said the impact on both coke and coking coal markets would be limited.

"Cost wise, China's coke is no longer competitive," he said, citing raw materials, labor and governmental taxes. Chinese cokemakers may not necessarily be able to undercut seaborne producers, he added.

A Polish trader also didn't think much of the policy's impact.

"I don't think it will cause a revolution," he said. "Prices in China for coke are quite high now, so even if you reduce the taxes, they're still quite expensive."

A coke purchasing manager at a Chinese steelmaker said he didn't expect any significant immediate impact.

"The export volume would still be small compared with total output in China," he said. "There might be some impact on sentiment, but this shouldn't actually affect China's domestic market."

China had been the world's biggest coke exporter until the introduction of the duty in 2008, which caused volumes to plunge. The country exported 15 million mt of coke in 2007, out of the 329 million mt it produced.

In February this year, China agreed to act upon recommendations made by the World Trade Organization's dispute settlement body, and said it would change policies to remove barriers to export coke, including taxes and quotas, by the end of the year.

Platts started assessing coke prices weekly on FOB North China and DDP North China bases since July 12 this year. The assessments, representing material with 62% CSR, were $420/mt FOB Tianjin and Yuan 1,730/mt ($277.39/mt) delivered to North China, respectively, as of Thursday (Chinamining).

China to boost land reclamation in mining areas

Date Dec 03 2012 10:59:09
Dec.03,2012(SHMET)--

The Ministry of Land and Resources is expected to issue specific measures to facilitate the implementation of a regulation to reclaim land, especially in mining areas.


The specific measures have finished collecting public opinion and are expected to help implement the Land Restoration Regulation, said Liu Yanping, deputy chief engineer of the law center under the Ministry of Land and Resources, on Thursday at an ecological restoration forum.


China passed the Land Restoration Regulation in February last year.


China's 1,500-plus mining districts occupy about about 2 million hectares of land, and the figure is expanding by 33,000 to 47,000 hectares annually, Liu said.


But the land reclamation ratio is merely 15 percent, far below the international level, which mainly stands at around 50 to 70 percent, Liu said.


Land destroyed near coal mines makes up about 80 percent of the total ruined by all kinds of mining. Thus, future efforts will mainly focus on coal mine areas, said Hu Zhenqi, secretary general of the land reclamation and ecological restoration committee of the China Coal Society.


The report to the 18th National Congress of the Communist Party of China emphasized the importance of ecological progress and advocated the building of a "beautiful" China in the country's overall development plan (Chinamining).

Report by SHMET

Resource tax reform expands

Date Nov 22 2012 17:23:05
Nov.22,2012(SHMET)--

Water will be subject to resource tax and coal will be taxed on price rather than quantity amid China's tax reform efforts, Finance Minister Xie Xuren said Wednesday.


In line with the 18th National Congress of the Communist Party of China report, the major target of tax reform is to build a multi-layer tax structure with circulation and income tax as its major components, supplemented with other taxes including property, environmental and resource taxes. The reform is intended to optimize the structure and promote social fairness, Xie said.


The move to impose water tax is part of the effort to push forward a reform on resources that will promote resource conservation and environmental protection, Xie said.


Coal tax will be levied on trading price rather than on quantity, Xie said. The changes are additions to the tax reform China launched nationwide last year, which taxed crude oil and natural gas on price-based calculations to curb over-consumption of energy and increase tax revenues (Chinamining).

Report by SHMET

China considers tax cut for iron ore miners -paper

Date Nov 21 2012 17:15:56
Nov.21,2012(SHMET)--

China is considering cutting taxes for domestic iron ore miners, state media reported on Tuesday, as mining firms in the world's top consumer of the ore struggle to compete with overseas rivals.


The country's Ministry of Industry and Information Technology (MIIT) will work with the finance ministry and other parties on a proposal to cut the current total tax rate of around 25 percent by up to half, the China Securities Journal reported, without citing sources.


Domestic iron ore miners have been burdened by high production costs and have failed to compete with Australian miners including Rio Tinto and BHP Billiton , forcing the country's big steelmakers to rely heavily on imported ore.


Industry sources estimated that the average cost of producing domestic iron ore, most of which is of a grade as low as 20 percent, ranges between $90-100 per tonne, compared with around $30-50 per tonne for Australian miners.


Restocking by steel mills on hopes China's new leadership will maintain infrastructure spending had pushed up iron ore prices to their highest since July last week.


But traders warned that the winter season in the country, which consumes around two thirds of global seaborne iron ore, would eventually dampen demand as construction normally pauses during the period.


Iron ore prices will be stuck in a downward trend in the coming years, Wang Xiaoqi, vice chairman of the China Iron & Steel Association told an industry conference last week.


Benchmark iron ore with 62 percent iron ore content .IO62-CNI=SI was unchanged at $122.80 a tonne again on Monday, based on data from information provider the Steel Index (Chinamining).

Report by SHMET

Rare earth policy comes under harsh criticism

Date Nov 14 2012 17:38:00
Nov.14,2012(SHMET)--

While Japan and other major rare earth importers are criticizing China's rare earth industry policies, they are expanding cooperation in exploring these resources worldwide. According to Bloomberg, the Pentagon, along with Japan's Toyota, has inked a cooperation agreement with Canadian mining corporations, aiming to challenge China's "monopoly."


China's rare earth reserves only account for 23 percent of the global supply. In the past, it supplied the world market at cheap prices regardless of the cost to its own environment and resources.


After such unreasonable exploitation, China no longer has as many reserves as imagined, while domestic demand for rare earths is on the up. As other countries start to seek new ways to explore these resources, the international geometry of rare earth supply will change.


We need to cope with this situation as soon as possible.


There are currently doubts both at home and abroad over China's rare earth export quotas.


According to the latest data released by the Ministry of Commerce in October, China plans to export 30,996 tons of rare earths in total this year. But in the first nine months of 2012, the export volume stood at less than 33 percent of the announced annual quota. Given that the 2011 quota was not used up, this year looks likely to set the same example.


Due to declining external demand, Japanese media even mocked China for miscalculating its rare earth policy. But in the long run, once the economy improves and external demand increases, the export volume will increase again. Should China take control of the allocation quota, it may again face international criticism.


Therefore, only when China's rare earth industry develops to the extent where it can manage both its production and export volume can it consider canceling the quota policy.


Meanwhile, adjusting the rare earth resource tax is essential for the development of the industry. As the prices of rare earths are relatively low, it is time to change the taxing method from quantity calculation to price calculation, the rate of which will be dependent on market forces.


The sustainable development of the rare earth industry will rely on its upgrading, and China should avoid being over-dependent on the international market.


The strategic reserves, export and exploitation of rare earths need to be further regulated. This is key to China's future use of its dominance in rare earths (Chinamining).

Report by SHMET
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