Foreign investors are still "in love" with Vietnam's mining industry

Although fluctuations in international demand and prices have put pressure on the profitability of Vietnam's mining and minerals industry, the sector remains an attractive source of foreign direct investment (FDI), an optimistic signal that shows long-term prospects.

Mining sector attracted foreign direct investment capital in the first 6 months of the year reached 7.7 billion USD, accounting for 10.6% of total foreign direct investment. According to a report by HSBC, investment in the mining sector ranked second only to the manufacturing and assembly industry, reaching 66.7%.

This shows the strong interest of foreign investors in the long-term outlook of the industry, despite the softening demand in some segments.

The FDI quota could be raised further if the government approves an investment plan, by the state-owned National Mineral Development Corporation (NMDC), to acquire a stake in the mining operation. Tungsten mining in Vietnam.

Last February, NMDC announced that it had negotiated to buy a stake in the polymeric mine in Nui Phao of Masan Resources Vietnam. This was echoed by a statement on September 1, saying that it was seeking a memorandum of understanding to begin the due diligence survey process.

The drop in mining output on the industrial index

According to data from the General Statistics Office (GSO) at the end of August, Vietnam's industrial production index grew by 6.7% over the same period in 2017. This figure is slower than the annual growth rate. seen last year and 2015.

A 6.9% drop in sales in the mining industry contributed to a slowdown in the manufacturing index, the General Statistics Office said.

This deceleration was lighter than the significant drop in output of 11.4% in the first quarter of the year, indicating that industry conditions are improving. However, according to a forecast by the Ministry of Planning and Investment in early September, unless the business environment in the industry continues to improve, the downturn may continue next year.

Slower growth could also weigh on the macro economy, making the ministry's year-end economic growth target of 6.8% for 2018 challenging to achieve.

Domestic coal demand is expected to increase to 121.5 million tons/year by 2025

One segment in Vietnam's mining industry that outperforms the industry average is the coal sector, with output and revenue increasing in the first eight months of this year, according to a report from the Ministry of Industry and Trade last year. September 8th.

In the first eight months of 2017, coal exports increased by 142.1% year-on-year and reached 1.4 million tons. Coal export earnings from January to August also increased by 228.5% year-on-year to $188 million.

The majority of shipments from Vinacomin are state-owned, accounting for nearly 62% of total coal exports from January to August. However, domestic consumption accounted for 87% of Vinacomin's coal output in the eight months, reaching 24. 6 million tons.

The results for coal exports to the end of August surpassed that of 2016. Last year exports were 1.3 million tons, down 27% from 2015, and earnings fell 23.8% to 141 million. USD during that period, according to data from the Ministry of Industry and Trade.

According to a government report last year, domestic coal demand is forecast to increase from 86.4 million tons/year in 2016 to 121.5 million tons/year in 2025 and 156.6 million tons/year in 2015. 2030.

The thirst for coal demand stems from the expanding role of combined power generation from multiple energy sources. More than half of the country's electricity needs will be expected to be met by coal-fired plants by 2030, according to the Government's Strategic Power Development Plan No. 7, with 83 plants adding 55.3 GW into the power grid.

Reliance on coal raises environmental concerns

While demand for coal and minerals remains strong, environmental concerns may limit expansion or add to production costs.

Greater reliance on coal for power generation will contribute to higher levels of air pollution unless advanced refining technology is implemented by the power sector. This will build on operating costs for existing plants and increase budgets for factories that have not yet been built.

Environmental concerns could also see the closure of the largest iron ore mine in Southeast Asia, with the Ministry of Planning and Investment announcing on August 30 that will spur the closure of the Thach Khe mine due to the impact adverse effect on the environment.

These concerns and government moves to curb the environmental damage caused by mining could affect investment in the industry. Although Vietnam's demand for energy and metals is growing, it is important to ensure that the mining industry remains the core industry.