September 08, 2008

Chinese coke enterprises to pass on tax cost by further price rise

Shanghai Securities News reported that when Chinese coke export tax was released to jump to 25% from 15%, the market appeared fairly quiet. The relatively large coke enterprises were prepared for the tax hike and had prescribed on the previously signed supply contracts to re fix the price if tax goes up.

Accounting for 40% of world coke trade, China's export negotiations are often carried out one to one. As per the industry source, the coke enterprises are going to re-discuss export price upon tax rise. Since the supply condition is tight at home, the coke enterprises would advance to raise the price, probably by 10% or more as per some source.

Mr Hua Zugui chairman of China Coal & Coking Holdings Co said that the coke price rises posted throughout this year will extend into 2008 and the coke sellers are ensured by the global steel, which is increasingly needed and meanwhile post growing demand for coke. He added that domestic supply has been particularly strained after the coal mining accidents in Hongdong, Shanxi Province and some coke enterprises even found the coking industry association for help.

The company source said that the coking coal price has been lifted by CNY 100 to 200 per tonne for 2008, pushing coke price to follow suit, by CNY 180 per tonne for Hongdongxian Yuanzhong Coking Co in December 2007. It added that "As the coke price is on constant rise, the Chinese exporters expect to pass on the higher tax cost."

From first quarter of 2007, Chinese coke export price started to step out of the valley and go up, often hoisted by the coking coal price rise, and the coke industry is considered limited in profitability.