Coal seller joins the price increase race11:45' 13/03/2008 (GMT+7) *VietNamNet Bridge – Four VIPs, the Electric company of Vietnam (EVN), the Vietnam Cement Corporation (VCC), Vietnam Chemical Corporation (Vinachem), and Vietnam Paper Corporation are now scared stiff as the Vietnam Coal and Mining Industries Group (Vinacomin) has announced a raise in the coal price as of July 1, 2008.*
* * After EVN announced a raise in electricity prices by 8.62% on average as of July 1, 2008, Vinacomin also threatened to raise the coal prices applied to four biggest coal consumers. In fact, the coal prices applied to the four consumers have been raised by 20-70% over the previous levels. However, the new prices are still 20-30% lower than the prices at which Vinacomin sell to other domestic consumers, and just equal to 50% of the export prices. *Price increase plan* * * Vinacomin plans to raise the coal sale prices again to make the prices closer to the market levels. The coal price applied to EVN will increase in accordance with the electricity price increase. This means that as of July 1, 2007, if the electricity price increases, Vinacomin will also automatically adjust the coal sales price. According to Doan Van Kien, Chairman of the Management Board of Vinacomin, the coal sale price increase is inevitable, which aims to implement the Government's instruction that the coal sale price must be set at reasonable levels, which truly reflects the real coal production cost. However, in the recent meeting with Vinacomin, representatives from chemical, paper, cement industries and EVN all expressed their concerns over the possible production cost increases of the industries if the coal price increases. Ha Bac Fertiliser Company, for example, plans to put out 173,500 tonnes of urea this year. As the coal price is expected to rise by 46%, the total production cost for the 173,500 tonnes of fertiliser will increase by VND77bil. The Van Dien Phosphate Company has estimated that the production cost for one tonne of fertilizer will increase by VND153,860/tonne, which will make the company spend VND42bil more to fulfill its production plan. *Domino effects* Hoang Manh Tien, Head of the Planning and Investment Division of Vinachem said that fertilizer producers will not be able to contend with the coal price increase, and they will have to raise the sale prices of fertilizer. Once the fertilizer price increases, the prices of farm produce will increase likewise. Other corporations have also confirmed that they will raise the sale prices of products once Vinacomin applies the new prices. As the price of coal sold to cement producers increased since January 1, 2008, members of VCC have raised the cement price by VND30,000/tonne, and they threaten to raise the sale prices further if Vinacomin raises coal prices. "Not only cement, fertilizer or paper prices, construction material prices and the prices of many other industrial products will increase in case the coal and electricity prices increase," an official from VCC said. Pham Chi Cuong, Secretary General of the Vietnam Steel Corporation, though steel mills only use limited volume of coke coal in laminating steel, enterprises still fear that the domino effects will occur when Vinacomin raises the sale price. Hoang Tho Xuan, Head of the Domestic Market Department under the Ministry of Industry and Trade has also expressed his concern over the coal price increase. If Vinacomin follows EVN and petrol distributors to raise the sale prices, this would have a very big impact on the market. "I agree that it is necessary to adjust the prices of several key products. However, I think that it would be better to choose the suitable moments to make adjustments. If all commodities go up in price at the same time, it would be unfeasible to curb inflation," Xuan said. *(Source: SGTT)*
