New direction for Vietnam coal industry

Resolution 55 of the Politburo has indicated that it is necessary to soon develop a new coal industry development strategy associated with the task of effective investment abroad and long-term coal import. This is a qualitative change, a new orientation for the coal industry.

In fact, in 2019, Vietnam Coal and Mineral Industries Group (TKV) and Northeast Corporation both focused on domestic coal mining and imported coal was quite limited. Imported coal is mainly used to mix coal to supply thermal power plants with specific requirements for coal quality.

Over the past 3 years, TKV has properly implemented the orientation of importing coal and simultaneously investing in coal mining abroad. TKV chooses to supply coal to Indonesia and Australia, towards Russia, South Africa and some other potential markets such as Mongolia, North Korea, the United States, Colombia...

The biggest feature of importing coal for thermal power production is to ensure a stable supply in the long term with competitive prices. To do that, the coal industry is implementing many solutions to diversify coal supply.

In particular, in order to have a stable coal source, enterprises must invest in buying mines abroad. China, Japan, Korea, India... have invested in buying mines in Asia-Pacific countries for decades. This is a risky and risky investment method, requires a methodical strategy and the Government must have appropriate support from policy mechanisms, investment support, international cooperation, energetic diplomacy. quantity...

According to the coal import experience of countries such as Japan and Korea (annual imports of 120-180 million tons of coal), the ratio between coal imports from investment (including direct investment and indirect investment) and coal imports under commercial contracts about 50/50. Therefore, in order to ensure a long-term and stable coal supply for thermal power plants, it is necessary to associate coal import with investment in coal mining abroad. During the investment process, it is necessary to diversify forms such as: Investing in new mines or acquiring mines for exploration and exploitation; buy shares of companies that are mining and exporting coal to gain the right to buy coal in proportion to the investment share. For the purchase of coal under commercial contracts, in order to ensure competition and avoid risks, it is necessary to diversify forms of coal import contracts such as: long-term contract, annual contract or trip-by-trip contract with appropriate proportions of each type of coal.

Regarding the organization of coal import, according to the experience of Japan and South Korea, it is necessary to focus mainly on enterprises with financial potential, with environment-friendly port and warehouse infrastructure, including: large potential enterprises such as Vietnam Coal - Mineral Industries Group, Vietnam Oil and Gas Group, Vietnam Electricity Group, Dong Bac Corporation and investors of power plants, cement plants large and commercial enterprises that meet the conditions for coal trading.

Need help from the Government

To be able to import and invest in coal mining abroad successfully, Vietnam's coal industry needs support from the Government, ministries and branches in terms of strategies, mechanisms, policies and finance.

First of all, it is necessary that the Government direct the Ministry of Industry and Trade and relevant ministries and branches to have appropriate policies and solutions to promote research and explore the potentials of coal resources and investment opportunities, and international law on coal mining. trade and investment, indigenous culture, human resources... of countries with potential coal resources, on that basis, expeditiously develop and organize the implementation of strategies and policies on coal import and foreign investment in coal mining. It is necessary to strengthen and maintain the operation of the National Steering Committee on coal import to direct the implementation of coal import in a synchronous, unified and transparent manner.

There should be detailed guidance documents on how to determine the costs in the coal price structure for power production (management costs, loss costs, etc.) which have not been clarified in Circular 13/2017/TT- Report dated August 3, 2017 of the Ministry of Industry and Trade.

The Government will soon have instructions on the plan to build a transit port for imported coal as well as support policies with strategic and long-term stability to create favorable conditions for enterprises to participate in long-term investment and management. effectively manage and improve competitiveness with businesses in the world.

The Government and the Ministry of Industry and Trade have timely directed to remove obstacles on mechanisms and policies for enterprises participating in coal import. It is necessary to have documents to replace parallel documents that have not yet been agreed.

The Government and competent authorities have detailed guidelines on creating opportunities for Vietnamese fleets to participate in cargo transportation according to Document No. 375/TTg-CN dated March 10, 2017, ensuring ensure competition, transparency and compliance with laws and international conventions to which Vietnam is a signatory; at the same time, there are incentive mechanisms and policies to develop a fleet of specialized inland and coastal shipping vessels suitable for transporting and unloading coal.

Regarding the improvement of coal import capacity and overseas coal mining investment of Vietnamese coal industry enterprises, it is necessary to have appropriate policies and solutions to support and encourage enterprises to invest in building a basic system of coal mining. infrastructure for coal import; allowing coal import hubs to participate in

For the import of coal for power generation, it is advisable to assign the focal points to proactively arrange a stable and long-term coal source with medium and long-term contracts (3-5 years) through direct negotiations with the owner. mines (with the volume of 60-80% of the total coal demand). The process of direct negotiation to select long-term suppliers must ensure competitiveness, transparency, based on global price indexes, in accordance with international practices and regulations of Vietnamese law.

According to forecasts, commercial coal production in the period from now to 2030 is expected: in 2020 about 47-50 million tons; 2025: 51-54 million tons; 2030: 55-57. To achieve that commercial coal output, the whole coal industry has a total investment capital requirement of VND 269,006 billion, an average of VND 17,934 billion/year.

With the increasing cost of coal production and the limited financial capacity of enterprises, in the coming time, the coal industry will not only face the risk of losses but also raise capital to meet demand. development investment will be extremely difficult. Therefore, it is necessary to soon develop a strategy for the development of Vietnam's coal industry.