Tuesday, June 7, 2011

China "unlikely" to lower VAT on imported coal

China is unlikely to cut the value-added tax on coal imports as such a move will only drive up international prices and in turn erase the price advantage of overseas supplies, traders and analysts told Reuters news agency. Industry watchers reportedly said there was little incentive for the Chinese government to give importers such a boost, as the country was already well-supplied with coal, with most power stations holding coal inventories of around two weeks.

Any move to favour importers and discriminate against domestic suppliers, would not only have Chinese miners up in arms, but also encourage international coal prices to climb, which would in time cause imported shipments to lose their comparative price advantage, traders and analysts said.

China's coal imports in the first four months of the year shrank 24% from a year earlier to 43.5 million tonnes, as utilities shunned more-expensive supplies from overseas and focused on domestic coal.

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