Singapore (Platts)--17Dec2012/641 am EST/1141 GMT

China will remove the 40% duty on the export of metallurgical coke from January 1, 2013, an announcement posted on the finance ministry's website showed Monday.

Coal-based coke and semi-coke, used in steelmaking, has been removed from a list of goods attracting export duty in 2013, according to a statement by the Customs Tariff Commission of the State Council dated December 10.

Market participants said China's coke export quotas have also been removed at the same time, although the Ministry of Finance couldn't be reached for comment. The Ministry of Commerce, which is also involved in setting trade policy, declined to comment on the matter.

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COKE RETHINK

Two recent buyers of coke via tenders said Monday they were considering whether they should renegotiate contracts as there was a possibility of cheaper offers being made after the announcement.

"Then what would happen to my spot deals?," said a Southeast Asian end-user who bought coke recently.

Coke buyers would now seek lower prices for coke as a result of the news, said another source at an Indian mill, adding that he would demand a Rupees 800-900/mt ($14-16/mt) drop if he were to buy from the spot market today.

Domestic coke prices in India would also face downward pressure from more competitively priced imports, he added.

Sources at Indian coke producers expressed anxiety after hearing about the confirmation of the removal of Chinese coke tax.

"I don't know and I can't understand which direction it will go," one of them said. "Domestic coke prices are already under tremendous pressure but I don't know what it will become," he said, conceding that domestic coke prices would be negatively impacted.

"There will be pricing pressure on Japanese and Colombian coke producers," he said. "Russian producers will also have a tough time now."

Indian cokemakers "will have to give a good price rebate to remain competitive" in view of potentially cheaper imported material, he added.

A source at a Russian coke producer said he expected prices of seaborne coke to drop to $260-270/mt CFR India from current $288/mt levels as a result of the duty removal.

"Tough competition will cause a drop in spot prices," he said. "There is too much coke in the market."

SOME SKEPTICAL

Some were less sure that the policy would directly translate into China's return as a major coke exporter.

A Beijing-based trader said the impact on both coke and coking coal markets would be limited.

"Cost wise, China's coke is no longer competitive," he said, citing raw materials, labor and governmental taxes. Chinese cokemakers may not necessarily be able to undercut seaborne producers, he added.

A Polish trader also didn't think much of the policy's impact.

"I don't think it will cause a revolution," he said. "Prices in China for coke are quite high now, so even if you reduce the taxes, they're still quite expensive."

A coke purchasing manager at a Chinese steelmaker said he didn't expect any significant immediate impact.

"The export volume would still be small compared with total output in China," he said. "There might be some impact on sentiment, but this shouldn't actually affect China's domestic market."

China had been the world's biggest coke exporter until the introduction of the duty in 2008, which caused volumes to plunge. The country exported 15 million mt of coke in 2007, out of the 329 million mt it produced.

In February this year, China agreed to act upon recommendations made by the World Trade Organization's dispute settlement body, and said it would change policies to remove barriers to export coke, including taxes and quotas, by the end of the year.

Platts started assessing coke prices weekly on FOB North China and DDP North China bases since July 12 this year. The assessments, representing material with 62% CSR, were $420/mt FOB Tianjin and Yuan 1,730/mt ($277.39/mt) delivered to North China, respectively, as of Thursday.

--Helena Sheng, helena_sheng@platts.com; Edwin Yeo, edwin_yeo@platts.com; Julien Hall, julien_hall@platts.com; Keith Tan, keith_tan@platts.com
--Edited by Jeremy Lovell, jeremy_lovell@platts.com

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