The Vietnam Coal and Mineral Industries Group (Vinacomin) has submitted aproposal to the Government to increase coal prices for the country'sfour largest coal consumers as of early next year.
In the wake of an instruction from the Prime Minister and the Ministryof Finance, coal prices sold to power, cement, fertiliser and paperproducers will increase to gradually match market price levels.
Under the proposal, producers of cement, fertiliser and paper will haveto pay prices that are only 10 percent lower than the export prices.
Meanwhile, the plan to raise coal prices for power producers will beimplemented in two phases. In early 2011, prices will be raised tolevels equal to the production costs in 2010.
Then, fromthe fourth quarter of 2011, Vinacomin recommended that the coal pricesfor power plants be equal to the sale prices applied to other bigconsumers.
The company currently offers a large discountto the four sectors to meet previous Government instruction designed tostabilise the local market.
Vinacomin deputy generaldirector Vu Manh Hung estimated that the price currently offered tocement, paper and fertiliser producers was only roughly 1.1-1.5 millionVND (56.4-76.9 USD) per tonne against the 2 million VND (102.6 USD)export price.
The sale price for the power industry isequal to only 35-40 percent of its export price and equal to roughly54-59 percent of other big consumers, or 27-33 percent less than itsproduction costs.
In light of the coal provision for thepower industry last year, Vinacomin said it had to offset a loss ofroughly 3 trillion VND (153.8 million USD).
Meanwhile,Hung said production costs for a tonne of coal currently reached 803,000VND (41.2 USD), surging up to 111.2 percent over last year.
Vinacomin said the price adjustment was crucial to creating capital forreinvestment aside from encouraging coal consumers to conserve themineral.
According to the group, investment capital forcoal production has kept rising. For example, in order to increase theoutput by 1 million tonnes of coal, it is necessary to invest 120-150USD million.
As such, in order to increase the output by20 million tonnes to meet the country's coal demand of roughly 60-65million tonnes by 2015, Vinacomin must invest 3 billion USD.
The Ministry of Industry and Trade has so far said that the coal pricehike would partly contribute to ensuring national power security in thecoming years. They explained that if they did not adjust the price now,the country would have to import coal at a higher price than thedomestic one, causing input costs of many industries to jump.
Vinacomin calculated that by 2015, the production cost for coal will be1.25-1.4 million VND per tonne. The current import price is 2.24million VND. This means that the production cost in Vietnam by 2015 willbe 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 ChemicalsGroup (Vinachem), said his company had proposed that Vinacomin not raisethe coal prices applied to fertiliser plants in 2011.
Thecoal price increase would be a shock to fertiliser producers, he said,adding that the latest coal price increases early last year reduced theprofit of Bac Giang Nitrogenous and Chemicals Plant by 260 billion VND.
Chairman of the Vietnam Cement Association Nguyen Van Thien said hisorganisation had also recommended maintaining the current coal pricenext year./.
In the wake of an instruction from the Prime Minister and the Ministryof Finance, coal prices sold to power, cement, fertiliser and paperproducers will increase to gradually match market price levels.
Under the proposal, producers of cement, fertiliser and paper will haveto pay prices that are only 10 percent lower than the export prices.
Meanwhile, the plan to raise coal prices for power producers will beimplemented in two phases. In early 2011, prices will be raised tolevels equal to the production costs in 2010.
Then, fromthe fourth quarter of 2011, Vinacomin recommended that the coal pricesfor power plants be equal to the sale prices applied to other bigconsumers.
The company currently offers a large discountto the four sectors to meet previous Government instruction designed tostabilise the local market.
Vinacomin deputy generaldirector Vu Manh Hung estimated that the price currently offered tocement, paper and fertiliser producers was only roughly 1.1-1.5 millionVND (56.4-76.9 USD) per tonne against the 2 million VND (102.6 USD)export price.
The sale price for the power industry isequal to only 35-40 percent of its export price and equal to roughly54-59 percent of other big consumers, or 27-33 percent less than itsproduction costs.
In light of the coal provision for thepower industry last year, Vinacomin said it had to offset a loss ofroughly 3 trillion VND (153.8 million USD).
Meanwhile,Hung said production costs for a tonne of coal currently reached 803,000VND (41.2 USD), surging up to 111.2 percent over last year.
Vinacomin said the price adjustment was crucial to creating capital forreinvestment aside from encouraging coal consumers to conserve themineral.
According to the group, investment capital forcoal production has kept rising. For example, in order to increase theoutput by 1 million tonnes of coal, it is necessary to invest 120-150USD million.
As such, in order to increase the output by20 million tonnes to meet the country's coal demand of roughly 60-65million tonnes by 2015, Vinacomin must invest 3 billion USD.
The Ministry of Industry and Trade has so far said that the coal pricehike would partly contribute to ensuring national power security in thecoming years. They explained that if they did not adjust the price now,the country would have to import coal at a higher price than thedomestic one, causing input costs of many industries to jump.
Vinacomin calculated that by 2015, the production cost for coal will be1.25-1.4 million VND per tonne. The current import price is 2.24million VND. This means that the production cost in Vietnam by 2015 willbe 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 ChemicalsGroup (Vinachem), said his company had proposed that Vinacomin not raisethe coal prices applied to fertiliser plants in 2011.
Thecoal price increase would be a shock to fertiliser producers, he said,adding that the latest coal price increases early last year reduced theprofit of Bac Giang Nitrogenous and Chemicals Plant by 260 billion VND.
Chairman of the Vietnam Cement Association Nguyen Van Thien said hisorganisation had also recommended maintaining the current coal pricenext year./.
