Coal prices: Power generator, coal company reach agreement

Tay Nam Da Mai Coal Mine of Viet Nam National Coal – Mineral Industries Holding Corporation Limited (Vinacomin) in northern Quang Ninh Province. - VNA/VNS Photo Trong Dat

The agreed price, which has not yet been disclosed, has come into effect from September 1, according to the Ministry of Finance.

Earlier, the relationship between EVN, the country’s largest power generator, and Vinacomin, a long-time coal supplier of EVN, became tense when EVN revealed its plan to reduce coal purchased from Vinacomin, the country’s largest coal miner, explaining that the group wanted to buy products at reasonable prices which fitted its power generation technology.

EVN was then seeking the Government’s permission to move forward with the plan, according to which it looked to reduce its coal purchase to 17.92 million metric tonnes, a two-million-tonne drop from its previous plan.

Vinacomin immediately expressed its opposition to EVN’s proposal, claiming it would make Vinacomin’s coal production costs increase and reduce effectiveness.

Besides this, the corporation would have to lay off 4,000 workers to make up for the financial losses if EVN went through with its plan to cut coal purchase.

Vinacomin requested intervention by the Government and relevant ministries to convince EVN to avoid purchasing coal from other units this year to avoid losses for Vinacomin.

In addition, claiming unfairness in taxes and fees, Vinacomin said the Ministry of Industry and Trade (MoIT) should have policies to encourage use of locally produced coal and limit imported coal.

“Under no circumstance should EVN stop buying coal from Vinacomin to purchase coal from foreign suppliers”, a representative of EVN said.

It was the high coal prices that had forced EVN to cut coal bought from Vinacomin. High coal prices would make electricity production cost increase and force the power sector to bear huge losses, he added. Therefore, instead of buying from Vinacomin, EVN would consider buying coal from other domestic companies at more reasonable prices, he added.

At a recent meeting, Minister and Chairman of the Government Office Mai Tien Dung requested that the MoIT and related agencies urgently implement solutions to consume Vinacomin’s coal inventory.

Dung said Vinacomin should also take measures to lower cost and increase competitiveness. For example, imported coal dust is priced at just VND1.4 million to 1.6 million (US$61-70) per tonne, while the price of coal produced by Vinacomin is VND500,000 higher per tonne, he said.