Firms outcry over price power hikes

Both steel and cement firms are demanding fair treatment in power pricesPhoto: Le Toan

Associations representing cement and steel producers have sent a document to the prime minister objecting to the application of higher power tariffs for major power consumers, including steel and cement plants.

Under the third draft of the retail pricing scheme conducted by state-run Electricity of Vietnam (EVN), steel and cement producers using power voltages of 110kV or higher during peak hour would pay 10 per cent more than the asking price for their normal power. Overall, the draft hands the power tariff hike of 2-16 per cent to steel and cement producers. The new rule is scheduled to take effect on July 1, 2013.

“There should not be any adjustment of power prices for the steel and cement industries. A price change, if any, should ensure fair treatment for all manufacturing industries, meaning power prices should not be increased for the steel and cement sectors only,” said Pham Chi Cuong, chairman of Vietnam Steel Association (VSA).

Cuong also pointed out that the cost of power only represented about 2 per cent of the total cost for making steel.

“It is not fair to apply separate power prices for the cement and steel sectors,” agreed Nguyen Van Thien, chairman of Vietnam National Cement Association.

The rational for the increase is that these industries consume a large proportion of the country’s total power production, particularly as the majority of steel and cement factories are using outdated, high-energy consuming technology.

Thien said cement plants recently improved their technology with improvements from G7 countries.

“The total designed production capacity of Vietnam’s cement industry reached 68 million tonnes, mostly using high technology equivalent to other ASEAN members’,” said Thien.

“Moreover, most domestic cement firms are suffering due to the woeful real estate market. If the power price increases it could push a number of them to the wall,” he added.

Steel firms presently fare no better. There are currently 30 large-scale steel producers and some 100 smaller ones. To date, no steel manufacturer has declared bankruptcy, but according to VSA, a large number of the firms cannot find buyers for their products and have had to halt production.