China to exempt US-origin petcoke from 25% import tariff: sources

The Chinese Ministry of Finance will offer tariff exemptions on US petcoke imports as the impact of COVID-19 continues to affect domestic petcoke production in the country, and with shipowners still reluctant to move their vessels into the Pacific basin.

According to S&P Global Platts Analytics, the situation in China has yet to return to "business as usual" and it will be weeks before economic and transport activity return to normal -- although it is difficult to assess the extent to which activity has returned due to insufficient data.

According to the official statement, issued Tuesday, China will accept applications from eligible companies starting March 2, and will not levy its 301 countermeasures against imported goods from the US.

"Everyone who applies will get the exemption," a US-based trader said. "Production at domestic Chinese refineries has been down due to the virus fears, but demand for low sulfur USWC petcoke has been strong."

With Chinese producers raising domestic prices due to the effects of COVID-19, Chinese producers will have a "new appetite" for imported petcoke from the US, a Europe-based trader said.

"By the Chinese lifting the ban on US imports, it will reopen the door for the Americans into China," the trader said. "I don't see a recovery for US petcoke, but this Chinese story may completely change everything."

A US-based market source said there was likely to be a net increase in demand for US petcoke, but said prices were still expected to fall as uncertainty around COVID-19 continues.

US petcoke was previously subject to Chinese tariffs as part of the trade dispute between the US and China, but market sources said Chinese buyers kept eating the tariff by continuously importing low sulfur West Coast petcoke last year due to limited global supply options.

In 2019 China imported 2.39 million mt of US-origin petcoke, with most of that coming from West Coast ports, specifically 1.13 million mt from San Fransisco and 612,000 mt from Los Angeles, according to trade data from the US Census.

S&P Global Platts last assessed USWC petcoke into China at $50/mt FOB and 3% USWC FOB at $44/mt.

Despite the slowdown in production, according to Platts Analytics, China's National Energy Administration said that 95% of China's central government-controlled coal mines were now operational.

Despite this, Platts Analytics said any recovery in coal and petcoke consumption has been minimal due to the slow return of the industrial workforce in China.