China, desperate for raw materials to fire its steel plants, will abolish export subsidies for coking coal and coke, a move likely to further hike costs for foreign steel makers who depend on Chinese supplies.
The country, which produces nearly half of the world's coke and more than three-quarters of its exports, has been hoarding the energy resource in part to aid domestic steel makers, whose margins have been squeezed in recent months.
China's Commerce Ministry said on Friday it would scrap rebates on coking coal and coke from May 24, after having won approval from the State Council, or the country's cabinet.
The move also comes as energy-starved China, bracing for another summer of severe power shortages, ordered miners to forego export profits and keep thermal coal used for power generation at home to ease the electricity crunch.
"This will help relieve an acute shortage of coke at home, and also help trim domestic prices," said Qu Li, an analyst at China Securities.
China sold 14.75 million tonnes of coke overseas last year, out of a record 1.6 billion tonnes of coal produced. The next biggest exporter, Russia, handles just two to three million tonnes a year, analysts say.
Steelmakers use 0.8 tonnes of coke to make a tonne of metal, analysts said.
China plans to cut coke exports by about a third this year, issuing export licences for less than 10 million tonnes compared with nearly 15 million tonnes last year - which has incensed the European Union.
Within China itself, lower export rebates might benefit locals such as Baoshan Iron and Steel, because it would keep more of the coal in-house, analysts say.
Coke prices have more than doubled in the past year to about $420 per tonne, driven by China's export restrictions and soaring demand from other industrialising nations, such as India.
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