Vinacomin attempts to raise coal prices

The Vietnam Coal and Mineral Industries Group (Vinacomin), the only coal producer and supplier in Vietnam, is planning to raise the coal prices applied to big consumers such as electricity, fertilizer, paper and cement producers, once again making the consumers worried stiff.

According to Vinacomin, since the coal export price and the dollar price have been steadily increasing, the sale prices currently applied to the big consumers since January 1, 2010, are equal to only 60 percent of the export prices. Meanwhile, under the current regulations, the domestic sale price is only 10 percent lower than the export price.

The currently applied domestic prices, which have been applied since January 1, 2010 are 1.5 million dong per ton for 3a coal dust, 1.35 million dong per ton for 3b coal dust, 1.26 million dong for 3c. Meanwhile, the prices are 1.17 million dong per ton and 1.1 million dong for 4b coal products. The price levels, which were set at that time, were 10 percent lower than the export prices.

Meanwhile, electricity plants are always considered “special consumers”. The coal prices applied to the consumers since March 1, 2010, are just equal to 54-59 percent of the sale prices applied to other consumers, and equal to 35-40 percent of the export prices. According to Vinacomin, the sale prices at which the group sells to power plants are just equal to 67-73 percent of the production costs in 2010.

Therefore, Vinacomin intends to raise the domestic sale prices applied to big coal consumers from 2011. The group said that it aims to encourage enterprises to save coal and increase the turnover for the coal producer.

It is expected that fertilizer, cement and paper producers will have to pay prices that are high enough to ensure that the sale prices are only 10 percent lower than the export prices.

The plan to raise the sale prices applied to power plants may be implemented in two phases. In the first step, from early 2011, the coal prices will be raised to the levels equal to the production costs in 2010, at 891,978 dong. Meanwhile, the current price of 4b coal applied to power plants is 648,000 dong per ton. The production cost and the sale prices of 5 coal are 779,655 dong per ton and 520,000 dong per ton, respectively. The figures for 6a coal are 660,725 dong per ton and 450,000 dong per ton, respectively. After the first phase, from the fourth quarter of 2011, Vinacomin hopes that the sale prices to be applied to power plants will be equal to the sale prices applied to other big consumers.

According to Vinacomin, in order to increase the output by one million tons of coal, it is necessary to invest $120-150 million tons. As such, in order to increase the output by 20 million tons of coal by 2015, Vinacomin will have to invest three billion dollars.

Vinacomin has calculated that by 2015, the production cost will be 1.25-1.4 million dong per ton, while the current import price is $115 per ton (2.24 million dong per ton). This means that the production cost in Vietnam by 2015 will be just equal to 62-65 percent of the current import price.

Dang Hoang An, Deputy General Director of the Electricity of Vietnam (EVN), declined to make comments about the tentative coal price increases. However, he said that the electricity retail prices are now still defined by the Government. Therefore, EVN will still have to face a lot of difficulties if the input material prices increase, because it cannot raise the sale prices of its product – electricity.

Nguyen Gia Tuong, Deputy General Director of Vinachem, has said Vinachem has proposed Vinacomin not to raise the sale prices applied to fertilizer plants in 2011.

“The coal price increase would be a shock to fertilizer producers,” he said, adding that the latest coal price increases have made the profit of Bac Giang Nitrogenous and Chemicals Plant reduce by 260 billion dong. – Vietnamnet

Tags: Vietnam Coal prices