China hits US coal with tariff

ABOUT-FACE: GOVERNMENT URGED FIRMS TO BUY

US product is sub-standard to coking coal bought in Australia. Beijing

At least three United States coal shipments on their way to China may end up as casualties of the escalating trade dispute after Beijing said it would impose steep tariffs that may kick in before the ships reach their destinations.

The addition of coal to the list of more than 650 items facing higher tariffs came as a shock to Chinese steel mills and trading firms that just last month were encouraged by Beijing to buy more US coal to narrow the trade gap, sources with knowledge of the plan said.

Although 545 items on the list face higher tariffs starting on July 6, Beijing did not specify when coal and the other remaining items would be hit. But coal’s presence on the list has sent shudders through the market.

“I am worried. I haven’t found buyers interested in these cargoes now,” said the manager of Shanghai Runhe International Trade Company, which has three shipments of US coking coal en route to China.

He said Runhe had paid for the coal upfront rather than using letters of credit from banks.

A cargo of US coking coal, depending on the size of the vessel, can be worth $10 million (R136,6 million) to $30 million.

From late 2014 until January 2017, China bought no coal from the US.

Purchases resumed at a lower level after President Donald Trump took office, Thomson Reuters Eikon data shows.

Trade flow data showed the three coal shipments, the only confirmed cargoes in transit from the US to China, are heading to Jintang port in Hebei province.

US coking coal typically costs three times more and takes three times longer to arrive than coal from Australia. US supplies can also be of poorer quality because of high sulphur content and low heating efficiency.

China bought 6.12 million tons of coking coal in 2017, of which 8.5% came from the US. – Reuters