Domestic power producers ponder over coal imports

photo source Lao Dong

According to Nguyen Van Bien, deputy general director of Vietnam National Coal-Mineral Industries Group (Vinacomin), Vinacomin will increase supply volumes to meet the power industry’s increasing demand for raw materials. Furthermore, Vinacomin commits to provide a long-term supply with stable prices, as requested by the Ministry of Finance.

Vinacomin plans to produce 27.5 million tonnes of coal in 2016, five tonnes more than in 2015, to supply raw material for the power sector. The figure will increase to 32.2 million once Dong Bac Coal Mineral Investment Corporation comes into operation.

As locally produced coal appears to be more expensive than imported products, some local power plants lean towards greater reliance on imports to feed production.

Nguyen Khac Son, general director of Power Generation Corporation 1 (Genco 1), said that Genco 1 is negotiating with Indonesian coal producers on the possibility of supplying coal for Duyen Hai 3 Thermal Power Plant in the southern province of Tra Vinh. Besides, Genco 1 plans to import 200,000 tonnes of coal from March 2016 as a test run, before signing for long-term with foreign partners.

Upon power enterprises’ proposal to buy cheap coal from foreign sources, the leader of Electricity of Vietnam Group (EVN), many power plant members of which have signed contracts to buy coal from Vinacomin, reminds that power producers need a stable coal supply with long-term contracts, instead of focusing on short-term benefits.

Bien added that buying cheap coal without signing long-term contracts is risky because it will not ensure a stable source of raw material for production. Besides, prices can be volatile in the face of weather and transport conditions.

“High tax rates and production expenditure put pressure on the price of domestic coal. Notably, coal production costs increased by an average of five per cent annually in the 2012-2014 period. Besides, associated fees and charges also rose sharply, such as the royalty rate, which skyrocketed from an average VND7,000 per tonne in 2007 to VND186,000 ($8.5) per tonne in 2015,” Bien shared.

According to Vinacomin former chairman Doan Van Kien thorough preparation for the long-term importing of large volumes of coal is important because coal importers will commit to supporting and investing in coal mines aboard.

“Licensed to import two million tonnes of coal from Vietnam since 1998, Japan has supported the Vietnamese coal industry in many aspects, one of which is human resources training in the coal industry, with a 100 people annually. Thus, the demand for importing between 50 and 70 tonnes of coal per year requires a specific commitment from the Vietnamese industry to avoid turning the coal importing ideal into sheer illusion,” Bien added.