Mining industry faces serious challenges
Some years ago, investors had to struggle for every mining license, simply because mining was considered a profitable industry.
In 2009, Tay Bac Investment & Minerals Company made a modest profit of VND2 billion.
In 2010, the company’s profit soared to VND196 billion, or 200 percent higher than the previous year. Its profit did not jump in the next years, but was still very satisfactory – VND38 billion in 2011 and VND40 billion in 2012.
However, things changed rapidly later when the company shares were forced to delist from the HCMC bourse because it took a loss. Two months ago, the shares were also delisted from UpCom.
The story of Tay Bac reflects the situation of the mining industry. Though witnessing a slowdown, the industry still had a growth rate of 6.5 percent in 2015 compared with 2014.
But things got even worse in the first half of 2016 with the decrease of 2.2 percent, compared to the same period last year of 8.8 percent.
Once the driving force for economic growth in 2015, the mining industry has been facing great challenges this year.
The bad performance of the mining industry explains why Hoa Phat Group returned Tung Ba and Cao Vinh iron mines in Ha Giang province to the State.
According to An Thong Investment & Minerals, a subsidiary of Hoa Phat, the mining cost is very high, while the iron ore price globally has dropped by 30-50 percent compared with early 2014.
As such, though Hoa Phat needs large quantities of ore for its steel plants, it would rather import ore than exploit it domestically.
A report of the Yen Bai provincial authorities showed that 31 out of 32 mining and ore processing companies had to shut down in 2015.
The machines that were bought to serve production lines worth hundreds of billions of dong have been left idle because of production suspension.
In Ha Giang province, only 11 out of 52 licensed mining projects had become operational by the end of 2015.
The other 20 projects had stopped operation, while the remaining are not operational yet.
Even Vinacomin, the biggest miner, also reported a decrease of 2 million tons in the first half of the year.
The same situation is occurring with crude oil exploitation. The exploitation cost is high, while the world’s oil price, though having recovered, only hovers around $50 per barrel.
Pham Dinh Thuy from the General Statistics Office (GSO) predicted that the mining industry would see growth falling by 9 percent by the end of the year
