Coal prices on the move

Vinacomin estimated that the price of coal sold to the cement, fertiliser and paper sectors was now equal to 60 per cent of coal export prices. Meanwhile, under Government Office Instruction 244/TB-VPCP dated August 11, 2009 and instructions by relevant ministries, coal price for domestic economic sectors  must be up to 10 per cent lower than export prices of similar coal items.

The widening gap between coal products’ domestic and export prices was attributed to rising export prices and escalating Vietnamese dong and US dollar exchange rate.

Therefore, Vinacomin intended to raise coal prices to local big coal consumers from early 2011 with an aim to promoting efficient use of coal and raising the coal sector’s revenue.

Accordingly, the coal sector will raise coal prices sold to fertiliser, cement and paper sectors to assure a maximum gap of 10 per cent between domestic and export prices.

Vinachem deputy general director Nguyen Gia Tuong proposed not to raise the price of coal sold to the fertiliser sector in 2011.

“Coal price hikes in 2010 were a shock to fertiliser manufacturers. For example, it created a dent of VND260 billion ($13.3 million) to 2010 proposed profit of VND500 billion of Bac Giang Fertiliser and Chemicals Company,” he said.

For the power sector, price adjustments may follow two steps. First, from early 2011 coal prices will surge equal to 2010’s actual production costs.  

Vinacomin then hopes coal prices for the power sector will be set based on market rules and equal the level sold to other domestic sectors from the fourth quarter of 2011.

After being adjusted on March 1, 2010, current coal prices for the power sector is equal to 54-59 per cent of that sold to other domestic production sectors, 35-40 per cent of export prices of similar coal items and 67-73 per cent of 2010 actual production prices.

The coal sector’s management said that coal price hike was important for it to expand coal production.

Vinacomin estimated that around $120-150 million investment would be needed for every million tonnes added to the coal sector’s output. Therefore, around $3 billion would be required to make the target of having additional 20 million tonnes of peat coal by 2015 achievable.

Coal production costs would be around VND1.35-1.4 million ($67.5-$70) per tonne by 2015, equal to 62-65 per cent of forecast import prices of VND2.24 million ($112) per tonne. Therefore, injecting more capital into coal development projects was considered the best solution by the coal sector’s management.

Vinacomin’s deputy general director Nguyen Manh Hung said the group sold out 34 million tonnes of coal in the year ending October, of which the coal export volume was 15.6 million tonnes, or 78 per cent compared to similar period in 2009.