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After officially concluding its negotiations with Australia on the pact on Monday, China has agreed to lower the duties it recently started imposing on imports of coking coal and thermal coal.

The tariffs on coking coal will be removed “on day one” while that on thermal coal will be phased out over two years, according to Australian government.

The removal of the import tax will improve sentiment, especially in the seaborne spot market, a trader said.

However, other market participants had a more tempered view of the free-trade agreement.

“The import tax relief is definitely good news for traders, but without a detailed schedule, its effect is difficult to say,” a trader source told Steel First. The market is still digesting the tax implemented in mid-October, so it will take time for the latest policy to take effect once it is finally introduced, the source added.

The import tax relief on Australian coal goes in the opposite direction of a rumoured cut in China’s export tax on domestic coal, which is seen as a bid to ease oversupply in the domestic market, an end-user source said.

Steel First's cfr Jingtang premium hard coking coal index edged up by $0.19 per tonne to $122.31 per tonne on Monday, while the hard coking coal index lost $0.56 per tonne to $111.15 per tonne.

The fob Australia indices were both unchanged, at $112.79 per tonne for premium hard coking coal and $100.52 per tonne for hard coking coal.

On the Dalian Commodity Exchange, the most-traded May coking coal contract closed at 773 yuan ($126) per tonne on Monday, up 4 yuan ($1) from last Friday’s close of 769 yuan ($125) per tonne. The most-traded May coke contract closed 1 yuan ($0.20) higher, at 1,065 yuan ($173) per tonne.