Vietnam: Vinacomin asks State to intervene in price dispute

Vietnam: Vinacomin asks State to intervene in price dispute
Published: 15 November 2006

The Vietnam Coal and Mineral Industries Group (Vinacomin) has requested the Ministry of Finance to intervene in price negotiations with the company’s four major customers.

In October, the State-owned Vinacomin moved to raise coal prices in order to remain profitable and to prepare for global integration. If prices do not increase, it is more advantageous for Vinacomin to sell coal on the world market, which would potentially create a supply shortage at home.

Nguyen Tien Thoa, deputy director of the ministry’s Price Management Department, says that coal prices are not fully regulated by the Government and any changes must first be negotiated by Vinacomin and its customers.

If negotiations fail, then the ministry can step-in and set prices in accordance with price ordinance regulations.

The four industries - paper, cement, fertiliser and energy - consume about 55 per cent of Vinacomin’s total supply.

Vinacomin has proposed a VND380,000 per tonne, or 20 per cent, increase on coal sold to paper and fertiliser manufacturers.

A representative from the Vietnam Cement Corporation (VNCC) says that under Vinacomin’s current proposal the production cost for each tonne of cement would increase by VND30,000 (US$1.87). Annually, this represents a VND200bn ($12.5m) increase in production costs for VNCC.

In response, the Ministry of Construction and the Vietnam Cement Association have submitted formal requests to the Government to raise the price ceiling on cement.

Industry insiders concede that cement prices will eventually rise as coal and other commodities become more costly.