Vietnam's coal imports ease in October

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Vietnamese coal imports in October fell from a year earlier for the first time since March 2018, snapping a run of growth that has absorbed some of the Covid-19 pandemic-driven oversupply in Asia this year.

Seaborne imports fell by around 350,000t to 3.72mn t in October, customs data show, which was also down from September's 3.9mn t.

Vietnamese customs data do not differentiate between coking and thermal coal.

Seaborne receipts in January-October rose to about 48mn t from 36.4mn t in the same 10 months of 2019. Vietnam imported 44.9mn t in the whole of last year.

The country's economy has proved more resilient during the pandemic than others, with support for industry buoying electricity demand. Vietnamese coal users, including power plants and cement mills, have been able to increase purchases to capitalise on weaker seaborne prices, particularly during March-May.

Overall electricity generation rose to 20.2TWh last month, up from 19.7TWh in October 2019 but down from 20.6TWh in September, according to the general statistics office.

Vietnamese cement production rose in October to an estimated 8.8mn t from 8.2mn t in the same month last year and 8.3mn t in September, offering further support to thermal coal consumption. The country produced 3.4mn t of crude steel last month, up from 1.6mn t a year earlier and 3.2mn t in September.

Vietnamese domestic coal production was 3.8mn t in October, down from 4.03mn t in the same month last year but up from 3.6mn t in September.

Indonesian coal accounted for much of the increase in imports last month, with receipts of all grades rising by about 471,700t from a year earlier to 1.6mn t.

Australian supplies made up 1.29mn t of Vietnam's imports last month, down by 425,200t from the previous year. The drop came with steady purchases of Australian coal by Indian buyers amid Beijing's unofficial ban on cargoes from Australia. Vietnam imported about 506,700t from Russia in October, down from 479,400t the previous year.

Thermal coal shipments to Vietnam rose by 11.3mn t from a year earlier to 34.5mn t for January-September, based on customs data from the world's key coal-exporting countries.

Indonesia and Australia accounted for 2.7mn t and 2.6mn t of the overall growth respectively, with total shipments of 13.6mn t and 10.2mn t during January-September. But South Africa was the leading driver of the trend as exports rose by 5.2mn t to 6.3mn t.

Around 4.3mn t of the export total was recorded over April-June when Covid-19 restrictions in India, South Africa's core market, were particularly severe. Monthly exports have dropped off quickly since then, with the 120,000t shipment in September representing a 10-month low.


New policy

The outlook for coal imports by Vietnam is steady given the number of scheduled and under-construction projects. This is despite long-term plans to rapidly grow renewable capacity in the next 10 years to ease the country's reliance on coal.

Vietnam is likely to continue with the development of 15 coal-fired power projects with a combined capacity of 18GW between now and 2026, according to sustainable energy think tank the Institute for Energy Economics and Financial Analysis (IEEFA).

But a new law related to public-private partnerships, scheduled to come into effect from the next year, could create fresh obstacles for investors in the sector. The law could dent the prospects of four of the 15 planned projects that have yet to reach the commissioning phase, with contractual agreements still awaiting an official sign-off, IEEFA said.

The law, once effective, could create uncertainty revolving around sovereign guarantees and issues related to bankability to fund the coal-fired projects. While the new rule seeks to standardise the build-operate-transfer contracts for the projects, it also makes Vietnamese law mandatory for the contracts related to the power project. This will end the practice of using English or Singaporean laws, something that may also dent investments in the sector.

By Saurabh Chaturvedi

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