China to scrap tariffs on Australian coal

China to scrap tariffs on Australian coal

The Chinese government has decided to scrap tariffs on Australian coal imports announced earlier this month once ongoing negotiations on a free trade agreement (FTA) between the two nations is finalized.

“The news is very surprising because just like the implementation of the tariffs, no one expected it to happen so quickly,” ICIS coal analyst Deng Shun told The Australian.

Canberra and Beijing are trying to seal a FTA before the end of this year after nearly 10 years of negotiations, in a bid to boost two-way trade already worth more than $132 billion (A$150 billion).

But China jeopardized the talks on Oct.8 by introducing a new duty of 3% for coking coal and 6% for thermal fossil fuel coming from Down Under, which shocked and angered Aussie producers, responsible for a quarter of Chinese coal imports.

Those levies put Aussie coal exports at a disadvantage to its biggest rival, Indonesia, which is exempt under China's free trade pact with the Association of Southeast Asian Nations.

Coal tradition

China's dependence on coal is well known. Annual consumption exceeded 1 billion short tons per year in 1988 and has exploded since then, to about 4 billion tons last year. This means the Asian giant gets about 70% of its energy from the fossil fuel, a number the government hopes to reduce to 65% by 2017.

In the past three years Australia’s coal industry has experienced challenging times with prices for thermal coal, which consumed by power stations to generate electricity, dropping over 40%. More than 10,000 coal jobs have been lost in Australia since 2011 as companies slash costs and idle mines amid a global supply glut.