Tax cuts trim coal trade

PUBLISHED : Friday, 18 May, 2007, 12:00am
UPDATED : Friday, 18 May, 2007, 12:00am

China, the world's largest coal consumer, was a net importer in the first quarter of this year as domestic supply tightened and a tax change helped to shrink sales overseas.

Imports rose 50.5 per cent to 19.22 million tonnes in the first four months, while exports fell 28.6 per cent to 15.87 million tonnes, for a net import of 3.35 million tonnes, according to Reuters, citing data released by the customs administration.

The export decline was largely due to the removal last September of a 5 per cent value-added tax rebate for sales overseas, according to a report posted on the customs' web site that said exports would continue to fall for the rest of the year.

A 5 per cent export tariff on coking coal last year and higher production costs due to tighter controls also crimped competitiveness in overseas sales, the report said.

Miners' production costs were driven higher by increases last November in land-use fees and resources tax in Shanxi and seven other coal-producing provinces and regions.

The closure of smaller mines was also helping to keep domestic coal prices high, which in turn reduced export incentives, the report said. In November, the government also encouraged coal imports by cutting the tariff on them between zero and 1 per cent, from 3 to 6 per cent, the customs report said.

About 76 per cent of coal imported in the first quarter came from Vietnam and India because of lower freight rates.

China imported 5.97 million tonnes of coal from Vietnam and 4.9 million tonnes of coal from India.

The markets have speculated the central government will remove import taxes on coal in the near term, which is expected to further boost imports, analysts said.