SteelOrbis Shanghai
China's Ministry of Commerce (MOC) has just issued its second coke export quota allocation list for 2008, with a total of 32 enterprises obtaining a combined 2.39 million mt of export quotas. According to the latest allocation list, Sinochem Corporation has been assigned a coke export quota of 220,000 mt, 170,000 mt has been allocated to China Minmentals Corporation, 160,000 mt to Sinosteel Corporation, 130,000 mt to Shanxi Sanlian Zhengfeng International Trading Co., Ltd, and 110,000 mt each to China Coal & Coke, Shanxi Dajin, Jinyan Power, Shanxi Tongzhou Trading and Shanxi Coke Group. On the other hand, the names of Xinjiang Yaxin, Shaanxi Fubang, Gansu Ruichi and other 4 enterprises have been deleted from the quota allocation list.
Including the first quota list, total coke export quotas allocated in 2008 total 12.01 million mt, down by 140,000 mt compared with the previous year's figure. Yang Wenbiao, secretary general of the China Coking Industry Association (CCIA) has stated that the total volume of export quotas released this time round seems very reasonable. He went on to say that the coke export quota should remain stable but just decline in a mild manner, so as to stabilize the international market, avoid trade disputes and improve the Chinese government's trading credit with other countries.
Prior to the announcement of the latest quota list, it had already become hard for some unqualified Chinese enterprises to obtain export quotas in the market. As a result, most trading enterprises stopped their coke exporting activity and the price of the coke export quota reached the level of $70-80/mt. The 2.39 million mt of new export quotas is even less than the current volume of coke exports from China over two months, and so is unlikely to alleviate the tight quota availability situation.
In this context, the export price of Chinese coke will continue to rise, boosted by tight supply, higher costs and the reduced export quota. Export quotations of China's first grade metallurgical coke have reached $720/mt FOB, but the prices of first grade metallurgical coke in the domestic market are around RMB 3,000-3,100/mt. Thus, including transportation, the export tariff and other costs, the total export cost is around $640/mt, which also shows the importance of the tight export quota.
Currently, China's coke exports only account for five percent of total national coke production. As a result, the reduction in coke exports will not affect the supply and demand relationship in the domestic market.
The latest statistics released by Chinese customs show that the country's coke exports in the first half of 2008 totaled 7.44 million mt, down 7.5 percent year on year. China's coke exports for April, May and June reached 1.34 million mt, 1.66 million mt and 1.5 million mt respectively, all up 24 percent and above quarter on quarter. If exports retain their current growth, there may be an increased possibility of the government raising the export tariffs. Some market players have already anticipated that coke export tariff rate will be adjusted to 30 percent.