The Vietnam Coal and Mineral Industries Group (Vinacomin) has submitted a proposal to the Government to increase coal prices for the country's four largest coal consumers as of early next year.
In the wake of an instruction from the Prime Minister and the Ministry of Finance, coal prices sold to power, cement, fertiliser and paper producers will increase to gradually match market price levels.
Under the proposal, producers of cement, fertiliser and paper will have to pay prices that are only 10 percent lower than the export prices.
Meanwhile, the plan to raise coal prices for power producers will be implemented in two phases. In early 2011, prices will be raised to levels equal to the production costs in 2010.
Then, from the fourth quarter of 2011, Vinacomin recommended that the coal prices for power plants be equal to the sale prices applied to other big consumers.
The company currently offers a large discount to the four sectors to meet previous Government instruction designed to stabilise the local market.
Vinacomin deputy general director Vu Manh Hung estimated that the price currently offered to cement, paper and fertiliser producers was only roughly 1.1-1.5 million VND (56.4-76.9 USD) per tonne against the 2 million VND (102.6 USD) export price.
The sale price for the power industry is equal to only 35-40 percent of its export price and equal to roughly 54-59 percent of other big consumers, or 27-33 percent less than its production costs.
In light of the coal provision for the power industry last year, Vinacomin said it had to offset a loss of roughly 3 trillion VND (153.8 million USD).
Meanwhile, Hung said production costs for a tonne of coal currently reached 803,000 VND (41.2 USD), surging up to 111.2 percent over last year.
Vinacomin said the price adjustment was crucial to creating capital for reinvestment aside from encouraging coal consumers to conserve the mineral.
According to the group, investment capital for coal production has kept rising. For example, in order to increase the output by 1 million tonnes of coal, it is necessary to invest 120-150 USD million.
As such, in order to increase the output by 20 million tonnes to meet the country's coal demand of roughly 60-65 million tonnes by 2015, Vinacomin must invest 3 billion USD.
The Ministry of Industry and Trade has so far said that the coal price hike would partly contribute to ensuring national power security in the coming years. They explained that if they did not adjust the price now, the country would have to import coal at a higher price than the domestic one, causing input costs of many industries to jump.
Vinacomin calculated that by 2015, the production cost for coal will be 1.25-1.4 million VND per tonne. The current import price is 2.24 million VND. This means that the production cost in Vietnam by 2015 will be equal to 62-65 percent of the current import price.
However, the plan to raise the coal price has made power, cement, fertiliser and paper producers worried.
Nguyen Gia Tuong, deputy general director of the Vietnam Chemicals Group (Vinachem), said his company had proposed that Vinacomin not raise the coal prices applied to fertiliser plants in 2011.
The coal price increase would be a shock to fertiliser producers, he said, adding that the latest coal price increases early last year reduced the profit of Bac Giang Nitrogenous and Chemicals Plant by 260 billion VND.
Chairman of the Vietnam Cement Association Nguyen Van Thien said his organisation had also recommended maintaining the current coal price next year./.
In the wake of an instruction from the Prime Minister and the Ministry of Finance, coal prices sold to power, cement, fertiliser and paper producers will increase to gradually match market price levels.
Under the proposal, producers of cement, fertiliser and paper will have to pay prices that are only 10 percent lower than the export prices.
Meanwhile, the plan to raise coal prices for power producers will be implemented in two phases. In early 2011, prices will be raised to levels equal to the production costs in 2010.
Then, from the fourth quarter of 2011, Vinacomin recommended that the coal prices for power plants be equal to the sale prices applied to other big consumers.
The company currently offers a large discount to the four sectors to meet previous Government instruction designed to stabilise the local market.
Vinacomin deputy general director Vu Manh Hung estimated that the price currently offered to cement, paper and fertiliser producers was only roughly 1.1-1.5 million VND (56.4-76.9 USD) per tonne against the 2 million VND (102.6 USD) export price.
The sale price for the power industry is equal to only 35-40 percent of its export price and equal to roughly 54-59 percent of other big consumers, or 27-33 percent less than its production costs.
In light of the coal provision for the power industry last year, Vinacomin said it had to offset a loss of roughly 3 trillion VND (153.8 million USD).
Meanwhile, Hung said production costs for a tonne of coal currently reached 803,000 VND (41.2 USD), surging up to 111.2 percent over last year.
Vinacomin said the price adjustment was crucial to creating capital for reinvestment aside from encouraging coal consumers to conserve the mineral.
According to the group, investment capital for coal production has kept rising. For example, in order to increase the output by 1 million tonnes of coal, it is necessary to invest 120-150 USD million.
As such, in order to increase the output by 20 million tonnes to meet the country's coal demand of roughly 60-65 million tonnes by 2015, Vinacomin must invest 3 billion USD.
The Ministry of Industry and Trade has so far said that the coal price hike would partly contribute to ensuring national power security in the coming years. They explained that if they did not adjust the price now, the country would have to import coal at a higher price than the domestic one, causing input costs of many industries to jump.
Vinacomin calculated that by 2015, the production cost for coal will be 1.25-1.4 million VND per tonne. The current import price is 2.24 million VND. This means that the production cost in Vietnam by 2015 will be equal to 62-65 percent of the current import price.
However, the plan to raise the coal price has made power, cement, fertiliser and paper producers worried.
Nguyen Gia Tuong, deputy general director of the Vietnam Chemicals Group (Vinachem), said his company had proposed that Vinacomin not raise the coal prices applied to fertiliser plants in 2011.
The coal price increase would be a shock to fertiliser producers, he said, adding that the latest coal price increases early last year reduced the profit of Bac Giang Nitrogenous and Chemicals Plant by 260 billion VND.
Chairman of the Vietnam Cement Association Nguyen Van Thien said his organisation had also recommended maintaining the current coal price next year./.
