China's coal exports seen falling after tax hike

China's coal exports could fall further in September as higher export taxes take effect, pushing up international prices and giving Australian producers a stronger hand in upcoming contract negotiations.

China, the world's largest producer and consumer of coal, on Friday said it would impose an export tax of 10 percent on thermal coal starting Aug. 20, as it seeks to ease a severe power shortage that has forced half the nation to ration electricity.

China also raised taxes on coking coal and coke, key ingredients in steel making.

Coal exports had already slumped by a third in July from June as international prices fell from record highs, although shipments in the first seven months of the year are up 5 percent from a year ago as Chinese producers took advantage of the gap between lagging local prices and hot overseas markets.

Steam coal prices at Australia, a benchmark for Asia, snapped a five-week losing streak last week, rising $7.74 to $163.90 a tonne amid supply disruptions in Vietnam and Indonesia after falling from a record $201 a tonne in early July.

By crimping China's coal exports from September, the higher taxes are likely to raise international prices. That could give Australian producers an edge in upcoming contract negotiations with Japanese and South Korean utilities, analysts said.

China, which shipped around 7 percent of globally-traded coal supplies in 2007, exported 30.28 million tonnes in January through July.

Chinese coal prices were steady on Monday after the announcement. The price at Qinhuangdao, China's top coal shipping port, remained around 1,000 yuan ($145.6) a tonne, traders said.

COKE PRICE TO JUMP

China also raised the export tax on coke to 40 percent from 25 percent, and on coking coal to 10 percent from 5 percent, as extremely tight supply this year has pushed up the prices of coking coal and coke.

 China exported 8.3 million tonnes of coke in the first seven months of 2008, down 8.3 percent from a year earlier. It has issued a total 12.01 million tonnes of export quotas for 2008.

But the tax hike is unlikely to solve the coke shortage in China, which produced 329 million tonnes in 2007 and exported 15 million tonnes.

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