MOF accepts plan for coal price increase
The prices of coal-dust to be sold to cement, paper and fertilizer producers will be raised to a level that will allow producers to cover production costs. The prices of coal lumps to be sold to phosphate and nitrogenous fertilizer companies will be raised to levels close to the production costs (81% of the production costs). The price increases will be carried out in the first half of November 2008.
In the next period, Vinacomin will be able to sell coal to cement, paper and fertilizer producers at market prices, commencing in the second quarter of 2009.
Only the price of coal to be sold to electricity producers will be temporarily kept unchanged. When the price of electricity is adjusted, the coal price applied to electricity producers will also be adjusted in accordance with the electricity price adjustment itinerary.
According to Nguyen Duc Chi, Chief of the Secretariat of the Ministry of Finance, the coal price adjustment applied to the three big coal consumers (cement, paper and fertilizer producers) should be seen as an important step in regulating coal pricing under the market mechanism.
Chi said that the current coal price adjustment proves to be timely and in accordance with the current regulations on pricing.
In fact, Vinacomin has kept the price of coal stable since January 1, 2008. The coal sale prices applied to the four biggest consumers are lower than the production costs (just equal to 38-79% of the production costs), lower than sale prices applied to household consumption (30-60%), and much lower than the coal export prices.
If Vinacomin does not raise coal prices in 2008, and it only makes the price adjustment once in 2009, consumers will bear sharp price increases in 2009
Currently, as Vinacomin still has to sell coal to domestic consumers at prices lower than the production costs, it has to use the profit it earns from coal exports to offset the loss from selling coal to domestic consumers. Therefore, a low coal price on the domestic market means the exporting of coal is doing well.
Meanwhile, Vietnam is striving to gradually limit coal exports as a strategy to ensure energy security. Vietnam plans to import coal by 2012 to meet the domestic demand.
