Chinese Coal Imports Would Climb on Reduced Tax, Barclays Says - Bloomberg

By Alistair Holloway
June 9 (Bloomberg) -- Miswin Mahesh, an analyst at Barclays Capital in London, comments on reports that China may move to boost coal imports in the face of power shortages.
The National Development and Reform Commission is studying a plan to cut the 17 percent value-added tax on coal imports to boost supplies, the National Business Daily reported June 7, citing an unidentified official at the economic planning agency.
Coal prices at the Australian port of Newcastle are a benchmark for the Asian market.
“A complete removal of the 17 percent VAT could make Australian coal attractive immediately, while a cut to 13 percent -- the rate just before 2009 -- could also halve the current domestic-versus-Newcastle price discount.
“That said, this does look like an emergency measure” and is “likely to be passed only if the situation worsens much further.
“A big swing factor is the state of hydro generation. Heavy rains in early June have at least brought some much-needed relief to drought conditions, and rains are expected to continue in the next week or so.
“Developments on this front will need to be closely monitored and will be instrumental to coal-market balances. A reduction in VAT will significantly increase China’s coal imports.”