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South Korea to increase coal import tax on 1 July

Indonesia's coal exports to South Korea likely to face headwinds on 1 July 2015, when South Korea's revised coal import tax kicks in. 

The tax, announced on 5 June, will now be KRW 24,000/t (USD 21.36/t) of coal with a calorific value (cv) above 5,000 Net as Received (NAR), versus KRW 19,000/t, and up to KRW 22,000/t (USD 19.58/t) of coal with a cv less than 5,000 NAR, versus KRW 17,000/t. This represents increases of 26% and 30%, respectively.

The tax increases are expected to put further downward pressure on Indonesia's coal exports, as Korean buyers are likely to become more selective in coal quality in an oversupplied market.

Additionally, the South Korean government has announced its decision to cancel the development plans of four coal-fired power plants with a combined capacity of 3.74GW. These were initially due for completion from 2019 onwards. 

Two new 1.5GW nuclear units have been proposed in place of the cancelled coal-fired plants. The government will make a final decision following a public hearing at end-June. We slightly lower our forecasts for South Korea, as we expect its imports to peak in 2015- 16, before they decline in the long term  

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