On 15 August 2008, China's State Council Tariff Commission announced that with effect from 20 August 2008 adjustments will be made to the export tariff rates for aluminium, coking coal and other bituminious coal. Accordingly, the export tariff for aluminium has been increased to 15%, metallurgical coke from 25% to 40%, coking coal from 5% to 10% and other bituminious coal to 10% respectively.

The government's move to introduce such a hike in the export tariff was intended to curb high level of pollution, high-energy consumption resources and to ease the tight domestic supply of metallurgical coke.

Notwithstanding the above, it is believe that such hike is expected to have minimal impact in China. China is expected to export approximately 40 million tons of coal in 2008 and for the first 7 months of 2008, 30.28 million tons of coal has been exported. Assuming the balance of 10 million tons of coal are not exported but remain in the Chinese domestic market, the 10 million tons of coal account for only 0.4% of China's annual coal production in 2008.

Similarly, the domestic metallurgical coke industry in China is not expected to be significantly affected. The Ministry of Commerce has permitted in year 2008, the total metallurgical coke export quota of 12.01 million tons (first batch of 9.62 million tons and second batch of 2.39 million tons). For the first 7 months of 2008, 8.27 million tons of metallurgical coke has been exported. Assuming the balance of 4 million tons of coke are not exported but retain in the Chinese domestic market, the 4 million tons is equivalent only 1.1% of the annual domestic metallurgical coke output (Source: www.custeel.com)

Sino Hua-An International Berhad will not be affected directly by the adjustments to the export tariff because all of our metallurgical coke are sold in the Chinese domestic market and none exported.