Calcutta, April 29: China is exploring the possibility of an additional duty on met coke export. Observers said this was in retaliation to India’s decision to levy an export duty of Rs 300 per tonne on iron ore.
Met coke — an essential input in steel — is in short supply in India. As a result, the country depends on China for the raw material.
Any increase in met coke prices, which has already appreciated by over 40 per cent in the past six months, will shrink the margins of steel companies. This might lead to a rise in steel prices.
Domestic steel firms wanted to raise prices last month but the government intervened.
The companies promised to hold the price line for a month.
Traders dealing in Chinese met coke expect a 5-10 per cent additional duty within a fortnight.
Chinese met coke is being exported at $200 (free on board) a tonne. “We are anticipating $10-20 increase in prices,” a Singapore-based trader told The Telegraph.
India imports about 5 million tonnes of met coke — almost entirely from China — to meet the domestic demand of 25 million tonnes.
It imports 20 mt of coking coal from Australia and Indonesia to turn it into met coke. India’s coking coal production is only 8 mt.
Non-captive merchant sellers of met coke, such as Gujarat NRE Coke, keep their prices on a par with the landed price of Chinese coke.
This is not unusual since Chinese met coke prices serve as a global benchmark. With Chinese FOB prices at $200 a tonne, the landed cost in India was $240 a tonne.
“We have been selling at $240 a tonne. Our information is it will go up further in future as China is mulling a fresh duty,” Sumit Khetan, president of Gujarat NRE Coke, said.
Some feel the Chinese move is an attempt to conserve the country’s fast depleting coking coal reserves for internal use.
However, a wide section believes the move follows India’s decision to impose a duty of Rs 300 a tonne on iron ore, which will affect China.
The Indian government’s decision followed months of lobbying by steel companies, which demanded a curb on iron ore exports to increase its availability in the domestic market.
The companies argued that India’s current steel production of around 40 mt was expected to go up to 80-85 mt by 2010 and there was a need to conserve iron ore for future.
India exports 80-90 mt of ore, a major share of which feeds the Chinese mills.
Given that 1.6 tonnes of iron ore goes into making 1 tonne of steel on an average, India’s decision to tax export will lead to an increase of Rs 480 or about $20 in input prices per tonne of steel for those depending on Indian ore.
China may also restrict the quantity to be exported. As a result, met coke prices are expected to remain high in the short to medium term.
The silver lining for the Indian firms is the appreciation of rupee against the dollar, which may partially offset the impact of increased prices.
Coke is in short supply globally and it is estimated that China’s coke resources will be depleted in 40 years.
Every year, steel companies around the world consume 427 mt of coke.
Last year, the US and the EU have launched anti-dumping probes into imports of foundry coke from China.