Analysts said the compromise reached between China and the European Union (EU) on coke trade is the best choice for now, but China should not be a major provider of the substance owing to its impact on the environment.

EU officials said on Friday that a last-minute deal had been secured that would guarantee coke imports from China, removing the imminent threat of a World Trade Organization (WTO) complaint.

Friday was the European deadline for an agreement before making a complaint to the WTO.

The European steel industry will get at least 4.5 million tons of coke from China in 2004, the same number it imported in 2003, EU Trade Commissioner Pascal Lamy said in a statement.

Export licences will be delivered without cost or delay, he said. He added that the EU will work with China to eliminate the export licence system by the end of the year.

"We are obviously very pleased that agreement has been confirmed on 2004 coke exports from China, which are obviously of vital importance to the EU steel industry," Lamy said in the statement. "It shows the growing maturity and strength of the EU-China trade relationship."

No official comment was available from the Chinese side.

The 25-nation EU said Beijing has broken trade laws by restricting exports of coke, a key raw material for steelmakers, thereby reducing global supplies and pushing world prices to dizzying heights.

The Chinese Government, however, argued that the WTO rules justify the protection of its own strategic raw materials.

China began capping coal export quotas this year to preserve supplies for its steel and power industries.

An industrial insider said the compromise can be accepted as it both feeds the EU demand and maintains China's export quota system.

China's coking coal industry had warned that the removal of export quotas would be "disastrous" for Chinese producers.

An official from the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC), who declined to be named, said the government should not suddenly terminate long-term restrictive measures on coke exports. Such moves could lead to chaos in domestic production and competition, jointly resulting in more pressure on China's environment.

He believed Chinese coke exports would remain level with last year, since China's promise to the EU will be applied to other countries.

The United States is also asking China to eliminate export restrictions on coke.

According to the CCCMC, China actually exported 14.72 million tons of coke to more than 51 countries and regions across the world last year, making up 60 percent of the total trade volume.

This year, China cut down its coal export quota by 26 percent, from 12 million tons for 2003 to the current 9 million tons.

"But China should manage to end its role as the world's major provider in the long run," the official suggested.

Coke production has had a significant negative impact on the environment. Many of the coke producers in developed countries were forced to close down because of environmental pressure, leading industries to turn to China for coke.

The government has scrapped tax rebates for coke exports and suspended approvals for new coke plants amid concerns of excessive investment in the industry because of high prices.

But the official said the measure is not enough to curb coke production. "The price of the coke should contain the cost to save the environment, which would be paid by the producers and users," he said.

(China Daily May 31, 2004)