China will scrap an export duty of 40% on metallurgical coke from next year, in a move that could spark a surge in Chinese exports and threaten regional vendors.

China's annual coke production is at about 420 million tonnes this year and the domestic market is oversupplied and removal of export taxes will encourage Chinese coke producers to send more stocks abroad. An end to the tough tariffs could send Chinese exports jumping to 8 million tonnes to 10 million tonnes in 2013, up from an expected 1 million tonne in 2012. The 2012 quota was set at 9 million tonnes but total exports of coke and semi coke in the year to October were only 907,000 tonnes.

Coke prices from Chinese port of Tianjin are hovering at around USD 400 a tonne FOB and the tariff removal could send prices down to around USD 275. That compares with FOB prices of around USD 280 a tonne for Japanese supplies. Increased Chinese supplies may also pose competition from Russian and Ukrainian exporters.

The move to scrap coke tariffs followed a ruling by the World Trade Organization in July last year that China's export curbs on several raw materials breached free-trade rules. The body has set a deadline of December 31 for China to act.

China used to be the world's largest exporter of coke, but its exports have almost dried up since 2008, when China raised the export duty from 25% in a bid to reduce pollution and later hiked it to 40%.