China Ponders Cutting Coal Export Tax

China, the world's top producer and consumer of coal, is considering a proposal to cut coal export taxes to 3 percent from the current 10 percent as part of broader efforts to help local miners, three trade sources said on Friday.

Analysts said such a cut would have limited impact on Asian seaborne supplies in the near term as Chinese miners have high production costs and the exports would still be uncompetitive compared to the top two coal shippers, Australia and Indonesia.

Chinese coal exports could become more attractive further out, analysts and traders said, if both provincial and central governments start to abolish administrative fees. A fast-expanding rail network could also reduce transport costs.

The proposal to cut coal export taxes, first put forward by the China National Coal Association over a year ago, is now being reviewed by the National Development and Reform Commission (NDRC) and could be introduced as early as 2015, sources said.

Review of the decade-old tax export policy comes as many Chinese coal miners struggle to survive after a year-long drop in prices. The national coal association said in June that 70 percent of the miners were operating at a loss and more than half were behind on workers' wages.

"If you were to look at the policies announced since June this year, it is very clear that the government is ready to pull out all stops to support the local coal industry," said Thomas Deng, an analyst at ICIS-CI Energy.

One of the sources said the government was also looking at proposals to reduce the value-added tax (VAT) for coal exports, currently set at 17 percent, which could help make Chinese coal exports more competitive.

To help prop up prices, which sank to a five-year low in September, Beijing last month started to levy tariffs of between 3 percent and 6 percent on coal imports.

China exported just 4.86 million tonnes of coal in the first ten months of 2014, a tiny fraction of its annual output of about 3.2 billion tonnes. Its key export destinations are Japan, South Korea and Taiwan.

Only four Chinese state-owned companies, China National Coal Group, Shanxi Coal Import and Export Group, Shenhua Group and Minmetals Group can export coal. The NDRC decides on the annual export quota and allocates volumes to the companies. (Reporting by Fayen Wong