Falling demand for coal forces Vinacomin to ease production

A truck loads coal at The Viet Nam National Coal and Mineral Industries Group's Coc Sau mine in the northeastern province of Quang Ninh. The group will reduce coal production from 43 to 39 million tonnes this year. — VNA/VNS Photo Trong Dat

Bien said that the cutback, which is roughly the same as last year, was due to a decrease in the demand for coal on both the domestic and overseas markets.

He added that in the first five months of this year, coal consumption was 17.7 million tonnes, approximately 41 per cent of the yearly target.

The turnover of VND39.6 trillion (US$1.9 billion), has dropped by 5 per cent when compared to the same period last year.

Several industries have seen their coal consumption fall, apart from coal for generating electricity which has already used 7.08 million tonnes, an increase of 6.1 per cent against the corresponding period last year.

The amount of coal used by the cement sector was 2.14 million tonnes, a decrease of 16.6 per cent over the same period last year while the fertiliser and chemical industries are up nearly 500,000 tonnes.

The group's current stockpiles have risen to 7.1 million tonnes due to the sharp decrease in consumption.

He added that the amount of coal now being mined outstripped demand from both the domestic and global markets.

The decrease is due to the worldwide economic downturn as well as the emergence of new energies, many of them renewable, being used by Russia and the US, which use 15 per cent of the world's coal, he said.

In addition, many countries that have their own coal reserves have increased production for their own domestic markets.

He said that coal prices in the global market had dropped sharply, which has had an adverse effect on the group's exports.

They had planned to export 9.5 to 10.5 million tonnes of coal this year, so will need to export 400,000-500,000 tonnes a month for the remainder of the year to reach their target.

He added that Vinacomin has also sought approval from the Government to clarify the price of coal sold to households according to market mechanisms.

In the first six months of this year, the group suffered losses of VND1.8 trillion ($8.6 million) as coal sold to the Electricity of Viet Nam has only covered 85-87 per cent of production costs.

It has also been seeking for approval from the Government to apply different levels of tax to coal exports instead of the current 10 per cent.