India has hiked its customs tax on metallurgical coke to 5% from 2.5% starting April 1 this year, a move that could help domestic coke producers cope with heavy competition from cheaper Chinese imports.

The import duty on iron and steel will also be increased to 15% from 10%, finance minister Arun Jaitley said during the country's Union Budget 2015-2016 speech on Saturday.

India imported 3.69 million mt of coke from January to November 2014, according to data provider GTIS, an increase of 10.6% when compared to the previous year.

This is despite the imposition of the 2.5% import duty in July 2014 under the previous government's budget. China is the biggest supplier of metallurgical coke to India, accounting for 2.01 million mt, or 54% of the market share in 2014. It is the largest shipper of met coke in the world, exporting 8.6 million mt in 2014. Market participants gave a mixed verdict to the doubling of the import duty.

The import tax rise -- amounting to an additional charge of $4-5/mt under current spot pricing -- will increase the competitiveness of domestic coke versus imports, according to one merchant coke producer, estimating domestic coke with 64/62% CSR and 12.5% ash to be tradable at Rupees 12,000- 12,500/mt ex-works east India.

However, he said the marginal rise in steel import duties will not be enough to lift poor downstream steel demand. Although the move might aid the merchant coke producers, it only serves to increase the raw materials costs for the overall steel industry, according to one steelmaker in east India.

"The merchant coke plants will welcome this, but not steelmakers who need lower input costs to compete with all the cheap Chinese steel coming in," the mill source said, adding that he was disappointed that the current 2.5% import tax -- imposed under the previous year's budget -- wasn't removed.

An international met coke exporter appeared to be unfazed by the news. "Chinese coke prices are still falling, so I still think that Chinese coke will still be competitive to India despite the tax," the trading source said.

The source was confident that Chinese coke still had an advantage when compared to Indian coke due to price, and better quality such as lower phosphorous content. "Chinese imported coke is still workable," the trader said.

India is the world's 7th largest producer of met coke, at 10 million mt, estimated one large Indian cokemaker. It was the top seaborne importer of Chinese coke in 2014.

Source:platts.com