China's move to impose a 3-6% tax on coal imports from October 15 is likely to hit Australian exports the hardest, while Indonesia would possibly see the least impact, sources said Thursday.
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At least three market sources said the Association of South East Nations -- in which Indonesia is a member -- would be exempted from the import tax.
"The import tax is not across the board, definitely not ASEAN," a Singapore-based trader said. "[The import tax is] bullish for Indonesian and bearish for Australian."
China will introduce a 3% import tax for both anthracite and coking coal and 6% for bituminous imports starting October 15, according to a statement on China's finance ministry's website.
A second Singapore-based trader said China's import tax on lignite has been kept unchanged at 3%.
A Jakarta-based coal trader said: "I believe Australian coal suppliers will suffer a little more. Australia has no other option. They just sell to China anyway."
He said the import tax is not applicable to Indonesian coal. "So there is more incentive [for Chinese importers] to buy Indonesian coal."
Standard Chartered analyst Serene Lim said said the move will have a "major impact on Australian coal exports to China."
Australia exported as much as 28.4 million of bituminous material to China in the first seven months of this year, up 20.3% from the same period last year.
Indonesia exported about 6.4 million of bituminous steam coal this year up to June, down 40.3% year on year, Platts data showed.
Market participants estimated that a 6% import tax on bituminous coal could add $2-3/mt to the price of seaborne cargoes delivered at southern ports.
"This is significant," an Asia-Pacific market participant said, adding that the tax would "destroy a lot of opportunity" for sales of seaborne cargoes of thermal coal to China.
A third Singapore-based trader said the tax could add a premium of "about $3/mt to the import price of Australian 5,500 kcal/kg NAR" thermal coal arriving in China.
Other market participants said the precise effect of the tax on CFR South China spot prices would depend on the response of Chinese buyers, whether they would be willing to absorb some or all of the additional cost.
Chinese demand for imported thermal coal has been relatively inelastic, unresponsive to price changes, meaning it would be likely that buyers would shoulder a significant part of the 6% import tax.
However, on Thursday bids were still being heard at about $66/mt CFR South China for cargoes of Australian 5,500 kcal/kg NAR thermal coal arriving in November, after Shenhua raised its prices by $2/mt for domestic material.
Chinese domestic thermal coal of comparative calorific value was trading at Qinhuangdao port in northern China at Yuan 475/mt FOB ($77.24/mt including 17% VAT, or $66/mt excluding VAT) and similar to the price for 5,500 kcal/kg NAR imported thermal coal in South China.
The Platts/Fenwei CCI 8 price for imported cargoes of 5,500 kcal/kg NAR thermal coal was assessed Wednesday at $65.70/mt CFR South China.
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