The deadlock of Vietnamese enterprises in importing and investing in coal mining abroad

As well known, coal is an important input in generating electricity, metallurgy, and many economic activities. Before 2015, Vietnam imported mainly coke for metallurgy, but since 2015 Vietnam has imported coal with an increasing volume. Especially, in 2020, the imported coal increased dramatically, reaching 54.81 million tons (nearly 8 times higher than in 2015), mainly coal for the thermal power plants (because domestic coal production only fluctuates at 40 million tons/year).

Vietnam has become a net coal importer, but according to the Vietnam National Coal - Mineral Industries Holding Corporation Limited (Vinacomin), coal imports set up many challenges for enterprises with no proactive supply, and no safety of the market prices that affect production and business of the enterprises.

Due to the concrete and clear policy of the State made the enterprises very embarrassed and impasse: For example, the coal price in the world market decreased lower than domestic one the inventory of coal of the coal enterprises increases (in 2016, the inventory coal of Vinacomin was 12 million ton). On the contrary, when coal in the international market should scarce, the price increases (due to the recovery of demand after the Covid-19 pandemic, and the conflict between Russia and Ukraine...) leading to an increase in domestic coal demand. But at that time, domestic coal production enterprises did not prepare in time, or could only comply with the plan, which made it difficult to meet demand, the coal mining enterprises and coal consumers lost the business opportunities, affecting the overall efficiency of production and business of the enterprises.

As for the coal import focal point, Vinacomin said: According to the Decision of the coal industry development strategy to 2015, orientation to 2050, "The Vinacomin is mainly responsible for the coal industry development, supplying domestic coal and acting as a focal point to coordinate with the large coal-consumers in importing coal for the country's socio-economic development needs, contributing to ensuring national energy security”.

In the Coal Planning according to Decision No. 403 in 2016 and the document assigning the task of implementing the planning, Vinacomin is assigned with the Northeast Corporation "to take the main responsibility for implementing the sustainable Coal Development Planning and well performing the role of the focal point in supplying coal for domestic consumption demand…”.

However, in documents No. 46/TTg-CN dated January 16, 2017, of the Prime Minister and No. 2172/VPCP-CN dated March 10, 2017, of the Government Office for directing the coal supply for electricity generation, Vinacomin is only one of the coal suppliers for the thermal power plants and not responsible for energy sustainability and coal supply for the economy of the country.

According to Vinacomin, in 2016 Vietnam imported 13.2 million tons of coal, among which for Vinacomin 1.13 million tons, 2020 Vietnam imported 54.48 million tons of coal, and for Vinacomin 9.6 million tons. In 2021 Vinacomin did not import coal.

According to Vinacomin the policy of the State for managing has the restrained and inadequate. These cause many difficulties for Vinacomin in making the long-term strategy and coal production and business plan for good implementing the signing targets.

Assessing the corporation with the strategic partners for long-term coal mining and investment in coal mining abroad, Vinacomin informs that Vietnam imports coal with low caloric value mainly from Indonesia, Australia, Russia, and South Africa… for the thermal power plants outside Vinacomin and for mixing with Vinacomin coal to supply the domestic thermal coal-fired power plants.

In general, the ability of imported coal supply is uncertain, and the infrastructure for coal imports (ports, wharves, coal-mixing facilities, coal quality control, means of transport, etc.) There are no large coal centers yet, and the technological level of the coal logistics chain is still lagging behind developed countries.

In fact, at present, Vietnam's imported coal does not need an import license and is not subject to import tax. However, the current import is mainly in the form of tenders (open international bidding, or competitive offers). This is very difficult to compete with the major importing countries such as Japan, China, and India ... especially since the demand for coal imports is increasing.

Along with that, our foreign direct investment procedures are still entangled and have not been implemented with coal mine investment projects abroad.

Due to the above policy, when the world coal prices fell lower than the domestic coal prices, Vinacomin and Northeast Corporation were strongly affected, and inventories increased (in 2016 the inventories of both units were over 13 million tons). On the contrary, the slow acceptance of coal export by Vinacomin every year also causes enterprises to lose business opportunities, affecting production efficiency.

In the strong international integration context of Vietnam, to adapt to the market mechanism and ensure national energy security, Vinacomin proposes that the State should operate the flexible coal import and export business ( by the market tools, not by administrative measures) for both encouraging the coal import and creating conditions for developing the domestic coal production.

Regarding the mechanism and policy of coal import and coal mining investment abroad, Vinacomin recommends:

Firstly: The Government should urgently develop synchronous strategies and solutions for the coal import and investment in coal mining abroad including buying coal mines in a spirit of ensuring the synchronization of all aspects (close coordination among all levels, sectors, localities, and enterprises under the unified direction of the Government ).

Secondly: Implement a flexible, efficient, equal, and mutually beneficial energy foreign policy. Ensuring harmony between energy foreign, trade, investment, finance policies, and cooperation with countries with coal resources and organizations for coal mining and exporting.

Thirdly: To ensure a stable and long-term multilateral and diversified source of imported coal, to minimize risks to the economy, especially coal for power production, Vinacomin has reported to the Government and the Ministry of Industry and Trade to allow carrying negotiation to direct buy import coal and signing the long-term contracts for coal trading with coal suppliers of the great potential in the world (especially coal from Australia).

Fourthly: Investing in synchronous construction of infrastructure and logistics systems for coal import in the direction of mobilizing maximum resources of the State and from the different domestic and foreign economic sectors