Last updated: Thursday, May 23, 2013
Slowing Demand Hinders Coal IndustryPosted: Monday, July 02, 2012
Declining revenues, shrinking exports and growing inventories are current challenges for Vietnam's coal industry, said Nguyen Van Bien, Deputy General Director of Vietnam National Coal - Mineral Industries Holding Corporation Limited (Vinacomin).
Vinacomin estimated revenues at VND44 trillion (over US$2 billion) in the first six months of 2012, equalling 46 percent of the full-year plan and declining 8 percent from a year ago. Coal sales were projected at 20 million tonnes, equal to 44 percent of the yearly plan down 10 percent over the same period in 2011. The group exported 7.1 million tonnes of coal while sold 12.9 million tonnes in the domestic market.
Since the start of 2012, Vinacomin’s member companies have operated normally but domestic consumption swindled. Many partners terminated coal contracts signed with Vinacomin because of slowing consumption. Contract-broken volume may reach 3 million tonnes.
Reduced consumption impaired the group’s coal production, employment and finance. The payroll declined from a year earlier. High levels of coal inventories wrecked production and processing activities of its member companies. Two coal processing factories had to halt operations because of short storage capacity. As of June 30, 2012, stockpiles were estimated at over 8.5 million tonnes.
Coal sold to cement producers - a main coal user - dropped over 10 percent because the prolonged slump of real estate market diminished cement demand.
Mr Nguyen Van Bien said Vinacomin is directing its member units to boost sales and seek customers. They will manage to ensure timely supply of coal. According to many coalminers, low-heat coal is purchased by many enterprises. Hence, the group has instructed its members to prepare a good stock of this commodity to meet their demands.
He added that the Ministry of Finance also allowed Vinacomin to reduce some 5 percent of coal prices for individual users. This helps coal producers more flexibly respond to slowing demand. This group of users are estimated to need 10 million tonnes this year.
Illegal mining processing, transportation and trading of coal was basically controlled and prevented. However, the transportation and mining of coal remains complicated in far-lying regions in the coal-rich province of Quang Ninh.
Before sluggish sales plus falling prices that reduce its finance for production activities, the group now gives price to stabilise production, provide sufficient employment and ensure incomes for all workers.
According to its business plan, Vinacomin will give investment priority to tunnelling and soil removal in both open-pit and underground ores to prepare for upcoming years while striving to cut expenses by 5 percent as well as embarking on corporate restructuring plans.
In the near term, Vinacomin will issue international bonds and seek cooperation from other financial institutions to have low-rate loans and maintain the stability of coal mining industry in 2012.