Power shortage worries increase hunger for coal

Cao Son Coal, the company with the largest mining output in Vietnam, on July 19 announced to improve and expand the capacity of the Cao Son coal mine in Cam Pha in the northeastern province of Quang Ninh, to meet high production requirements.

Coal mining companies are increasing output to deal with power generation shortages, Le Toan

The mine has total reserves of almost 52 million tonnes, with a designed capacity of about 4.5 million tonnes per year. By upgrading the reserves, Cao Son’s coal mine is expected to complete a record high mining output of 6.78 million tonnes in 2022.

Phan Quoc Viet, director of Cao Son Coal, said, “We have mobilised equipment to maximise the exploitation of raw coal at the Cao Son mine. In 2021, we achieved a mining output of over 6.4 million tonnes.”

Many miners feel that Cao Son Coal’s plan to increase output faces many challenges, especially considering the increasingly difficult and complex open-pit mining conditions. Similar to other open-pit mines in Vietnam, the Cao Son mine is exploiting deeper and farther, with an increasing level of risk.

The miners believe that high input costs will prevent Cao Son Coal from reaching a record in mining output. Currently, the coefficient of rock removal and transportation speed at open-pit mines has tripled compared to 1995, from 3.4 to 11 cu.m per tonne, while the transport level has increased four times, from 1km to over 4km, according to state-run Vietnam National Coal-Mineral Industries Group (Vinacomin).

The group asked coal mining companies to increase outputs to deal with a shortage of coal for power generation, a risk that threatens to disrupt industrial supply chains and hinder international economic growth. The total volume of coal for power production in 2022 is expected to be about 43.99 million tonnes, according to the Ministry of Industry and Trade (MoIT).

Dang Thanh Hai, general director of Vinacomin in July said that the domestic demand for coal is at a very high level, especially coal for power production in the peak months of the hot season. “We have directed coal production units to mine an additional 1.4 million tonnes of coal,” Hai said.

Nguyen Tien Chinh, former head of Science, Technology, and Development Strategy under Vinacomin, commented that the current situation of coal production and consumption reflects the results of the investment process in the past.

“Along with geological mining and production conditions, and market factors, the mechanisms and management policies for coal production are still inadequate,” Chinh said.

Vietnam is maintaining a high royalty policy for coal production. Total royalties and fees account for 16 per cent of coal production cost. In which, the natural resource consumption tax is 12-14 per cent of the taxable price and the cost of granting coal mining rights is 2 per cent.

With this, the average cost is about $9.20 per tonne. In addition, the environmental protection tax applied to coal is $1.30 per tonne, which is included in the coal price.

“Many countries are maintaining lower tax rates in the coal industry. Australia’s royalties are between 7 and 10 per cent. Meanwhile, China charges 2-8 per cent per tonne, Indonesia about 3-7 per cent, and South Africa 0.5-7 per cent,” Chinh said.

Vietnam has transformed itself from being a coal exporter to a net coal importer. The MoIT data showed that the coal exports of 24 million tonnes in 2009 decreased to 12 million tonnes in 2013, and to only 1.9 million tonnes last year.

Meanwhile, coal imports increased rapidly from 2.3 million tonnes in 2013 to 14.7 million tonnes in 2017 and 36 million tonnes in 2021. The MoIT even forecasted that coal imports will increase to about 46.5 million tonnes by 2025 and 123.7 million tonnes by 2045.

Many miners find it impossible to increase production by around 10-15 million tonnes for Vietnam’s thermal power plants in a short period of time.

Meanwhile, Vietnam’s future coal demand continues its upward trend. It is expected that the domestic coal demand will reach about 92-99 million tonnes in 2025 and about 171-182 million tonnes in 2045, according to the draft strategy for the development of Vietnam’s coal industry towards 2030 complied by the MoIT.

Le Minh Chuan, chairman of the Members’ Council of Vinacomin, called on the National Assembly deputies to apply innovative thinking when considering the national energy security strategy for 2030 and 2045.

“Vietnam’s coal resources are now located mainly in Quang Ninh province. The companies have mined as deep as 500m under sea level, creating huge pressure. It is very difficult to increase productivity amid complicated production, increasing costs, and declining human resources,” said Chuan.

Coal conundrum ahead forces Vietnam to rethink priorities While the pressure on the environment and issues like climate change are increasing, it remains difficult for Vietnamese companies and the government to turn away from fossil fuels completely. However, experts warn that while a strong reliance on them will only increase related problems, using state-of-the art technology would count most.

Coal shortages require Vietnam to diversify supply sources Vietnam is now in need of diversifying energy supply sources as it is facing a shortage of coal supply for electricity, cement, and fertiliser production due to impacts of the COVID-19 pandemic and the Russia - Ukraine conflict.

Coal power balance back on the agenda Following global tensions and heatwaves in its metropolises, Vietnam is becoming more ravenous for energy by the day, demanding not just sufficient but also sustainable solutions against the backdrop of its zero emissions targets.

Vietnam spends $5 billion on coal imports In the first seven months of this year, Vietnam spent over $5 billion to import coal for thermal power plants, up 123 per cent on-year.