Vietnam to raise coal prices by 40%

Asia’s coal-fired power plant operators are in for a massive price shock.

The Vietnam Coal and Mineral Industry Group (Vinacomin), Vietnam’s coal monopoly, plans to increase its coal prices this year by as much as a staggering 40% to cover higher production costs.

“There must be another coal price increase in 2012,” insisted Bui Van Khich, Deputy General Director of Vinacomin.

“Last year we suggested an increase of 10% to 15% and the level of 5% was approved. We’ll continue to make proposals this year, and another increase of 30% to 40% is necessary to offset the production cost.”

He claims that current prices can only cover 60% to 70% of Vinacomin’s production cost. Khich said the production cost has reached US$48 per ton. This coal is sold to electricity generators for only USD$29 per ton after several price increases.

Vinacomin expects to export 13.5 million tons of coal in 2012 at the average price of US$100 per ton, and intends to steadily reduce export volume in the following years.

Vietnam aims to raise its coal output to 58 million tons in 2015 from an estimated 49 million tons this year in an effort to meet the huge demand from electricity producers in Asia.

Coal will remain a major fuel in Vietnam for electricity production in the next five years and will account for 47% of power generation by 2020. Vietnam’s coal reserves are estimated at 49 billion tons.

The Ministry of Industry and Trade reported that Vietnam’s coal consumption in January was 2.8 million tons, a drop of 10.8% year-on-year.