Coal shortage to affect thermal power plants in Vietnam

Saigon Investment
(SGI) - Coal output for thermal power plants in Vietnam is highly dependent on large volumes and the superior quality of imported coal. 

Illustrative photo.

Illustrative photo.

In the last few years, the volume of imported coal has increased sharply to meet the needs of an increasing number of thermal power plants currently in operation. The requirement of coal for 2022 for all thermal power plants in Vietnam is estimated at 35 million tons.

Recently, the Vietnam National Coal and Mineral Industries Group (Vinacomin) reported to the Ministry of Industry and Trade the present situation of coal production, trading, and coal supply for the entire thermal power industry. According to Vinacomin, the high price of input materials for production of gasoline and oil, as well as of imported coal for blending, is two to three times higher than that of domestic coal. This has created several difficulties for the industry.

Simultaneously, the cost of coal mining is increasing as well due to deeper digging of coal mines. Some mines have complicated geological conditions that are not documented in the original design of the mine, so the level of risk in the process of mining is increasing to a higher level of danger. Although the process of mining is increasing every year, the location of mines is getting further and further which has increased transportation costs, and the supply cost has also risen due to increase in wages and taxes of workers.

From the beginning of 2019 until the end of 2021, the domestic coal selling price for power production had not increased, so profit from coal production was decreasing. Some coal mine development investment projects are also not balanced to meet with economic efficiency during implementation. All these factors are creating pressure on Vinacomin in the long term and in coming time this will affect the company both in terms of profit as well as put more pressure to change the production structure.

It is not just the coal production being exploited domestically that is facing difficulties but imported coal sources for use as raw materials for thermal power plants is also facing the same situation. Therefore, to have the required 35 million tons of coal to supply thermal power plants in 2022, Vinacomin believes that it will be heavily dependent on the import of coal. In the first quarter of 2022, Vinacomin only imported 325,000 tons of coal, which means that the output during the first quarter was only about 1.1 million tons, down 2.4 million tons compared to the set target.

By the end of the first quarter, coal consumption for power plants was more than 6.3 million tons, equal to 17.15% of the contract output. The volume of coal supplied to thermal power plants was over 8.5 million tons, while thermal power plants registered demand of more than 9.7 million tons. The ongoing Russia-Ukraine conflict has made the price of petroleum, iron, and steel go up very high compared to the expected price, which may lead to a decrease in business efficiency at Vinacomin, or even cause a financial imbalance that will have repercussions in the long term.

Vietnam has twenty-four coal power plants, of which twenty are using boiler-fired technology that use low-quality bran coal and spray coal. In general, coal power plants mostly use low-quality and cheap coal to operate. This is not counting dozens of thermal power plants in industrial parks and processing zones. Because of this, coal electricity is cheap.

It sounds very economical at first, but it is also a setback for the development of the electricity industry and the coal industry in Vietnam. For the export coal industry, after deducting the cost of import, the profit is certainly not much. In another direction, the precarious supply of raw coal will directly threaten the energy security in Vietnam when thermal power plants will not be able to operate at full capacity due to a severe shortage of coal.

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