To balance finance and ensure a profitable business, coal industry has to limit its input costs. For example, pays for coalminers account for only 20 percent or less of product costs. Moreover, costs for safety and infrastructure of the coal industry, especially environmental protection, could have been added to ensure sustainable development.
In response to the Government’s request on inflation control, Vinacomin had to sell coal to cement, paper and fertiliser producers at a price that was VND2,000 billion below than cost price in total in 2008. The figures were VND2,500 billion in 2009 and VND2,000 billion in 2010. This seriously affected the balancing of capital for the group in the past years.
The Vietnamese economy will need 60 million tonnes of clean coal in 2015 and Vinacomin is responsible for manufacturing 55 million tonnes. In 2010, the group produced 41 million tonnes of clean coal and it will have to add 14 million tonnes to its annual output in the next five years, an equivalent of 16 million tonnes of raw coal. Meanwhile, opencast coal output declined about 4 million tonnes and underground output shrank 20 million tonnes).
According to Vinacomin, to increase the coal output by 1 million tonnes, the group will need to invest about US$150 million. To realise the target set for 2015, Vinacomin will require US$3 billion to increase 20 million tonnes of coal. Depreciation costs and interest rates payment for such a huge loan will take 5 percent of costs. Thus, coal price by 2015 will be VND1.5 million a tonne.
Vinacomin said, to offset input costs, coal prices must be added 14-15 percent a year, with a higher rate expected for 2011 because of soaring input prices. Selling prices of coal for cement, paper and fertiliser producers must be raised 20-40 percent to compensate input costs in 2010 and early 2011 only.
To invest VND15,000 billion for coal production, the group must have a own capital of VND3,000, an equivalent of VND6,000 billion profit a year. Meanwhile, the profit projected for 2011 is just VND3,500 billion, not enough to guarantee for enough loans for development investment.
To have a real business profit, the rate of returns must be higher than the lending rate at bank. Returns on revenues of the group are now just 9 percent while interest rates are 17-18 percent per annum.
Thus, adjusting coal prices is necessary to ensure sustainable development.
Recently, higher coal prices help offset increased costs. The coal industry must balance its capital to improve accommodation and transportation conditions for workers and provide them with better protective equipment, especially for coalminers. The most important is the group must preserve enough capital, maintain production capacity, and ensure profits to new development investment in the coming years.
Huong Giang
Vietnamese
