Australian coal body calls for urgent talks on new tariffs

Australia must hold urgent talks with China to exempt coal producers from new tariffs in a free trade agreement due to be completed this year, an industry body said, following China's move to reintroduce coal tariffs after nearly a decade.

China, the world's top coal importer, said on Thursday it would impose import tariffs on the commodity in its latest effort to prop up ailing domestic miners that have been hit by rising costs and plunging prices.

The tariffs would hit Australian producers hardest as its main coal export rival, Indonesia, is exempt from the tariffs through the Association of Southeast Asian Nations' free trade agreement with China.

China took nearly one-quarter of Australia's metallurgical coal exports in the year to June 30, buying A$5.5 billion ($4.81 billion) of the coal used in steel mills. It also took A$3.5 billion worth of thermal coal, accounting for about one-fifth of Australia's exports of coal used in power stations.

The Minerals Council of Australia called the new tariffs a poor decision and pressed the Australian government to ask Beijing to reverse the decision, saying it would ultimately hurt Chinese consumers by raising coal costs.

"This decision raises the stakes on the outcome of talks on a free trade agreement with China due to conclude next month. In those negotiations, the Australian coal industry has sought the immediate abolition of tariffs on Australian coal exports," Brendan Pearson, chief executive of the Minerals Council of Australia, said in an e-mailed statement.

If the tariffs are not addressed in an Australia-China trade agreement, exports from BHP Billiton Ltd, Glencore Plc, Rio Tinto Group, Anglo American and smaller producers, including China's own Yancoal Australia Ltd, will be affected.

"This news is more bearish than we had anticipated for thermal coal, as we had expected coal import tariffs to lift but at a lower 3 percent," UBS AG analysts said in a note.

BHP, Glencore and Rio Tinto had no immediate comment on the Chinese tariffs. Anglo American declined to comment.

Trade Minister Andrew Robb said he did not expect the tariff announcement to hold up talks for concluding a free trade pact with China and he added that he expected the impact on Australia's second-largest export would be limited.

"We have got a timeline that should take us to conclusion before the end of the year," he told Australian Broadcasting Corp radio.

He said Australia has among the highest quality coal in the world and China is likely to consume 1 billion metric tons more coal over the next five years, and he expected Australia would be a competitive source to fill that demand.

"So it's not a good thing for our coal industry, but it's not the end of the world," he said.

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