Low prices hamper coal resources management

Le Duong Quang

Vinacomin has recently proposed coal price hikes for big coal consumers from early 2011 as it said current selling prices were only around 60 per cent of export prices. Why is that?

In this respect, Vinacomin is following the Notice 244/TB-VPCP dated August 11, 2009 of the Government Office and the Ministry of Finance’s instructions in Document 13513/BTC-QLG dated December 4, 2009 providing guidance on coal price management towards coal-using domestic economic sectors.

Accordingly, the coal prices sold to these economic sectors, except for power, must be up to 10 per cent lower than similar export prices. This is aimed at stimulating economical use of coal resources, promoting technological innovations and curbing coal fraud and smuggling.

The price of coal in the regional and international market rose quickly over the past years, thus widening the gap between domestic and export coal prices. The big gap between domestic and export prices will hamper coal resources management as a huge volume of coal might be directed for export to enjoy higher prices as was the case several years ago.

Will surging coal prices lead to price hikes of many other items?

With current coal prices, most cement companies have reaped healthy profits, the situation was even better for cement joint ventures and most of them have been prepared for the upcoming coal price adjustment. Vietnam has been exporting cement and clinker and has benefited from competitive prices.  

We assume that initially coal prices will be adjusted every six months to make it more compliant to actual market situations, then adjustments will be made quarterly.

Has Vinacomin thought about market price stabilisation as it is a state entity taking charge of natural resources exploitation and management?

To ensure stable market prices the Vietnamese government enacted a raft of instructive documents to postpone coal price adjustments though price hikes were already regulated several times.  

That was why coal prices for big local consumers such as cement, paper and fertiliser sectors remained stable for nearly a year amid big price fluctuations in both domestic and world markets.

Thereby, Vinacomin’s [coal price hikes] proposal was compliant to the general commitment to setting the energy under market rules. The government will decide when it is the most appropriate for the price adjustments.