Domestic cement and fertilizer producers are lamenting a sudden coal price hike that is cutting deep into their operating profits, and are urgently asking for government intervention to arrange an acceptable increase.
Last week, the Vietnam Coal and Mining Industries Group (Vinacomin) – the country’s sole coal supplier – announced it would raise the current price of coal sold to cement and fertilizer producers by 40 to 50 per cent. The new prices will be effective from November 1.
Vinacomin attributed their price hike to a need to offset losses incurred selling coal at lower price to domestic consumers. The hikes are also necessary, they say, to fall in line with the liberal pricing structure of the market economy.
Vu Van Hiep, deputy director of the state-run Vietnam National Cement Corp. (VNCC), said that the hike are “incredibly high and the applicable date came all of a sudden.”
“We agree that both VNCC and Vinacomin’s operations are being driven by the market but we suppose that the price hikes should come to us in a greater appropriate rise percentage and in a more suitable period of time,” Hiep said, adding that according to Vinacomin’s recent announcement, the price of coal sold to cement makers would rise by 44 per cent, from VND369,500 ($23.09) to VND532,000 ($33.25) per ton.
He said the impact was made all the more greater by the fact that, under government intervention, Vinacomin had originally said it would only raise coal price on cement producers by 20 per cent.
At present, VNCC is using between 1.3-1.5 million tons of Vinacomin coal per year, and with the price hikes, they will have to pay an extra $13.1-15.2 million for the materials it needs.
“It [the extra production cost] will become unaffordable for us, when cement producers are not encouraged to change cement prices at a time when many construction projects are deadlocked as a result of natural calamities,” Hiep said.
“We have reported our situation to the Prime Minister for intervention. We would like to accept only a 10-20 per cent increase in the coal price, which Vinacomin previously announced to the Ministry of Finance,” he affirmed.
Much in the same situation, fertilizer makers will also find their profits deeply cut if the coal price hikes become effective. A representative of Van Dien Phosphate Fertilizer Company said domestic fertilizer producers had already reached preliminary agreements with Vinacomin right after coal monopoly had announced their new price schedule.
In the agreement, he said, the increase applicable to fertilizer makers would be 20 per cent on the current prices and the effective date would be January 1st next year.
“The 20 per cent rise is much better than the 50 per cent rise which Vinacomin told us before the agreement. But frankly, at the moment, we do not like to see any coal price rises because we have to pay an extra sum of $687,500 next year to buy 70,000 tons of coal we need,” said the representative.
Currently, Van Dien is paying Vinacomin VND614,000 ($38.4) per ton for coal. The representative said that between 2000 and 2006, the price of Van Dien’s phosphate fertilizer increased by only 15 per cent.
“The price hike is really difficult for us because our customers are totally poor farmers,” the source said.
VIR
Vietnamese
