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Chinese users buy US coking coal amid lower offers, paying 25% tariff

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Source: pexels, May 24, 2019

The Chinese market saw the conclusion of two trades of US Buchanan coking coal with 40% CSR, 18%-19%VM, 7%TM and 5-6% Ash as offers, excluding 3% import duty and 25% tariffs, have fallen to entice buying interest, Platts confirmed Thursday.



A trade was done Thursday for 135,000 mt of Buchanan at $152/mt CFR China, excluding 3% import duty and 25% tariffs. This was for an on-the-water cargo. Considering the import duty and tariffs, the trade would be equivalent to $195.70/mt CFR China. This was done to a Chinese steelmaker.

Another trade was done late last week for 60,000 mt of the same coal at $152/mt CFR China, excluding 3% import duty and 25% tariffs as well and on-the-water cargo.



The Chinese steelmaker said that offers for Buchanan have been lowered on several occasions. The attempt to lower offers can be considered as a sellers' intention of absorbing the duties and tariffs imposed.



"Furthermore, our mill would like to have Buchanan in their coal blending requirements," the Chinese steelmaker said.



Buchanan was heard actively offering in the Chinese market April, where the offer price was around $207/mt CFR China inclusive of the 3% import duty and 25% tariffs. However, Chinese users were not keen until recently, the offer was revised to around $153-154/mt levels, excluding 3% import duty and 25% tariffs.



Another Chinese steelmaker who was considering to buy Buchanan last week said that steelmakers show interests in Buchanan for its 5-6% Ash content. He did not conclude a Buchanan trade eventually as he deemed the price as uncompetitive still.



According to Platts spot trade data, Buchanan was last traded at $180.50/mt CFR China excluding 3% import duty during late-May 2018. Shortly, there were news of potential tariffs imposition of US origin coking coal which was eventually in place on August 2018. This meant that Chinese steelmakers have been working on a coal blending that eliminates the use of Buchanan coking coal.



Recently, the Chinese Ministry of Finance has allowed for exemptions on US imports, including coking coal on May 15. The exemptions may be granted on several grounds. Among others, Chinese users facing difficulty in seeking alternative options may apply, or if the tariffs implemented have resulted in significant economic losses. Those who find that the tariffs implemented have resulted in major consequences such as an industry's development, technological progress or environmental efforts may also apply.



However, the two Chinese buyers of Buchanan gave ambivalent responses.



"We will not be applying for the exemptions as there is no good reason for it," one Chinese steelmaker said, adding that there were other considerations of higher priority eg customs related concerns pertaining to the procurement of US coking coal.



"I am still contemplating if I should apply for the exemptions but I do not harbor any hopes that it will be accepted," the other Chinese buyer said.



According to China's customs statistics, China imported 60,585 mt of US coking coal in the first quarter of 2019, down 45% compared with the same period a year ago. In 2018, China imported 2.1 million mt of US coking coal, down 33% compared with the same period a year ago.

News Source: S&P Global
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