Vinacomin tips higher coal price

Thursday, Apr 11, 2013 15:45



Nguyen Van Bien


Despite the latest price adjustment, the coal price is currently only 63-66 per cent of the cost of production.

Vietnam News Agency spoke to Nguyen Van Bien, Deputy General Director of the Viet Nam National Coal and Mineral Industries Group (Vinacomin), the country's largest coal supplier, about this issue.

Is it true that the price of coal is now lower than production costs?

Yes, it's still hard to find capital resources to offset the fact that coal sells for less than production costs. Meanwhile, wages have decreased by 10 per cent compared with one year ago, making it hard to recruit workers.

If the price of coal is not adjusted, miners' income will decrease and the local coal industry will suffer from a lack of investment capital for mining development.

The group has sent several documents to relevant ministries petitioning for further adjustments in the price of coal. Adjusting the price would help remove obstacles facing the coal industry and ensure stable employment and living standards for workers.

How were production and business for Vinacomin in the first quarter of this year?

During the first quarter, Vinacomin exploited 11.7 million tonnes of coal, making up 25 per cent of the target set for this year. The group's coal consumption stood at 10.7 million tonnes, also 25 per cent of the yearly target.

In the January-March period, the group posted VND24 trillion (US$1.14 billion) in revenue, providing an average salary of VND7.5 million ($360) each month.

This is the result of great efforts. We are still encountering financial difficulties and have yet to turn a profit that we can reinvest.

The coal industry development strategy from now to 2020 states that VND22 trillion to VND25 trillion ($1.05 billion – $1.19 billion) is needed annually to develop mines.

But in reality, it is hard for Vinacomin to accumulate capital while the current export price of coal is only enough to cover costs and the domestic price is even lower than production costs.

In previous years, coal was also sold for less than it cost to produce, so how did the group manage to perform effectively?

Previously, the volume of coal sold for electricity was modest, accounting for only 10-15 per cent of total domestic coal sales. However, this quantity has been increasing. In the first quarter, over 50 per cent of locally consumed coal was bought to use for electricity production.

The most important thing is that before 2011, high export coal prices helped the group compensate for its domestic problems.

But due to the global economic slowdown, the export price of coal fell sharply. Thus, after taxes, coal exports are now just enough to cover costs.

What do you think about the current tax imposed on coal exports?

Viet Nam's coal exports are levied at 10 per cent. That rate is much higher than that of other Asian countries such as Indonesia and Australia, where coal exports enjoy a tariff exemption.

With such a high rate, it is very difficult for the coal sector to ensure financial balance if it also spends money on meeting technical standards and ensuring miners receive fair wages.

Therefore, the industry had to continue to reduce wages and choose favourable locations for coal exploitation to reduce costs.

These measures, however, also came with risks, such as a shortage of labour for production and causing damage to infrastructure and the environment. That would hurt the industry's target of achieving more sustainable development.

In the current context, we suggest the State consider revising the coal export tax based on the world price of coal published each quarter.

What is your production and business outlook for the whole year?

This year, Vinacomin aims to sell 43 million tonnes of coal, with priority given to meeting domestic needs (about 28-29 million tonnes). The remainder will be exported.

The group strive to attain a revenue of more than VND104.43 trillion (over $4.97 billion), which would be a 15 per cent year-on-year increase.

In order to reach this goal, the group will instruct its affiliates to cut costs, closely follow the market's requirements and strictly supervise the quality of coal and delivery schedules in order to stabilise production and reduce inventories.

Further adjustment of coal taxes to a reasonable level will help stabilise the coal industry and ensure its sustainable development. — VNS

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