* China imposes 3 pct tax on lignite imports from Aug 30
* Lignite exempted from import tariffs under China-ASEAN FTA
* Indonesia accounted for 97 pct of China's lignite imports
By Fayen Wong
SHANGHAI, Sept 2 China has announced a 3 percent
tax on imports of steam coal with low calorific value but is yet
to spell out details of its applicability, leading to
uncertainty whether shipments from top low-grade supplier
Indonesia will be subjected to the tariffs.
Indonesia is the biggest seller to China of lignite, a form
of low-grade coal, with its shipments accounting for 97 percent
of China's total lignite imports in 2013 up to end of July.
Moves by China, the world's top coal buyer, to slap an
import tariff on lignite may dent sales of Indonesian miners
such as Bumi Resources and Adaro Energy and
could spark defaults of existing contracts.
China's State Council, the country's cabinet, last week
approved a plan to implement a 3 percent tariff on lignite
imported from countries under the most-favoured nation trade
status, according to a statement from the finance ministry.
The new tax rule came into effect on Aug. 30, according to
the statement. Lignite currently enjoys zero import tariff.
(For more details, click on: here)
The statement did not specify what grades of lignite, in
terms of heating value per kilogram, would be affected, although
industry sources said Chinese customs statistics classify coal
with a calorific value of between 3,800-4,200 kcal/kg as
However, trade sources questioned if China would be able to
impose import tariffs on Indonesian coal, since a free trade
agreement between China and the Association of Southeast Asian
Nations (ASEAN) has brought import tariffs for lignite to zero
since the start of 2012. The import tax on other coal has been
scrapped since 2008.
"China is a signatory of the FTA and Beijing has promised
zero import tariffs for all ASEAN member countries. I don't
think they can arbitrarily change that," said a Shanghai-based
The customs office could not immediately be reached for
"The customs office may require importers to provide a
certificate of origin for all lignite shipments and those that
can provide the documents will be exempt from the tax," said Cao
Zhongfang, an analyst with industry portal SXCOAL.com.
"But the smaller Indonesian miners and traders may have
trouble providing those certificates at such a short notice, so
lot of shipments could be held at up the ports."
Indonesian miners contacted by Reuters said they are still
seeking clarity on the matter.
Non-ASEAN countries that export lignite to China include
Australia, North Korea, Russia and Mongolia. They account for
about 4 percent of China's lignite imports.
NARROWING PRICE ADVANTAGE
Beijing's move to tax imports comes after the domestic coal
association lobbied the government in May to ban imports of all
low-grade coal, citing the impact on local miners.
China imported 187 million tonnes of coal, including
lignite, in the first seven months of 2013. Total lignite
shipments stood at 35.97 million tonnes during the period, up
about 12 percent from year ago.
Traders said the levy, if applicable to Indonesia, would
dent the price advantage of imports.
With imported lignite currently priced at about $47 a tonne
on a landed basis, the newly imposed tariff would add about 8
yuan ($1.31) a tonne to its cost, industry sources said.
"Traders may not be able to pass on the extra costs to
utilities and that may spark a wave of defaults," said a
Guangzhou-based trader. "We're going to wait for more clarity
before we book anymore shipments."
Chinese domestic coal, with a heating value of 5,500
kcal/kg, fell 7 yuan from a week ago to 546 yuan ($89.21) per
tonne, according to the Bohai-Bay Rim Steam Coal index.
($1 = 6.1195 Chinese yuan)
(Additional reporting by Viriya Paramita; and Michael Taylor in
JAKARTA; Editing by Muralikumar Anantharaman)