Chinese government recently said that imported coal will be subject to 3-6% tax depending on type from 15 October. Morgan Stanley analysts Wee-Kiat Tan and Sara Chan believe the new import tax for coal could worsen the oversupply situation in the regional seaborne coal market “We believe this new tax will not affect coal import volumes from Indonesia, given existing Free Trade Agreements (FTA) between China and ASEAN.” However, imports from Australia, which was set to sign a FTA with China before the end of the year, are likely to be impacted. In the first eight months of 2014 China imported 24mt of thermal coal from Australia, or about 30% of its total imports of the commodity This volume accounts for 5% of the global seaborne market and would have a material impact on the already weak spot coal prices if it comes back into the seaborne market. Even without any restrictions, China’s coal imports are said to have started coming under pressure since May of this year.
China’s coal tax could possibly be a precursor to taxation on other commodities – most notably iron ore.
Domestic iron ore industry in China are at the very high-end of the cost curve and that a tariff on imports would clearly help the loss-making domestic producers.
Dry Bulk Shipping News - Shipbroker Notes