Following the trend of other staples, prices for coal have been increased by between 20% and 40% beginning early this month.
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| Rises in coal prices may not lead to more inflation |
The state-owned Vietnam National Coal-Mineral Industries Group (Vinacomin) said it has received approval from the Ministry of Finance for such increase, but that it has not made any official public decision.
Vinacomin, the country’s top mining company, said the coal price increase is inevitable because cost of extraction has risen sharply, along with the depreciation of VND and high import tariffs.
Before March 31, coal prices for electricity, cement, paper and fertiliser industries represented only between 50% and 60% of export prices, a Vinacomin official said.
According to the official, coal prices should be floated on the open market to make domestic prices comparable to the exports, which might prevent speculation.
He added that a price increase of between 20% and 40% is acceptable and may not have any effects on the country’s inflation rate.
Vinacomin is in desperate need of capital to invest in its coal production projects. The group’s capital demand for coal production is estimated at around VND15 trillion (USD717.18 million) per year. This means that Vinacomin must be able to mobilise VND3 trillion (USD143.43 million) every year, as well as make a gross profit of VND6 trillion (USD286.87 million) annually.
However, the group may fall short of this amount in 2011, as it is forecast to make a gross profit of only VND3.5 trillion (USD167.34 million) during the year.
Even though the country is forecast to have to import coal for power projects by the year 2013, currently coal companies have no better option than to export.