Vietnam boosts coal imports as it promises investors no more power cuts

Credit: REUTERS/Nguyen Huy Kham

By Francesco Guarascio and Khanh Vu

HANOI, March 26 (Reuters) - Vietnam's coal imports so far this year have nearly doubled from the same period of 2023, customs data shows, as the government strives to reassure foreign investors that factories will not face a repeat of last year's power shortages.

The Southeast Asian nation, which hosts large manufacturing operations of multinational companies like South Korea's Samsung Electronics 005930.KS, Taiwan's Foxconn 2354.TW and Japan's Canon 7751.T, is facing increasing pressure after it could not guarantee continuous power supplies during a prolonged heatwave last summer. Some factories were forced to temporarily suspend production.

During a meeting with foreign investors last week, Prime Minister Pham Minh Chinh vowed there will be no more electricity shortages, state media reported.

The prime minister's office did not respond to requests for comment.

Vietnam's limited capacity to use renewable energy and commitments to avoiding new power cuts makes it "imperative" to import more coal, said Phan Xuan Dung, a researcher on Vietnam at the Singapore-based ISEAS think tank.

Coal imports, mostly from Australia and Indonesia, were up by roughly 88% as of March 15 compared to the same period last year, customs data shows. In the first two months of the year output also rose 3.3% from domestic mines, which usually cover about half of Vietnam's demand, according to official estimates.

That comes after Vietnam's 61% increase in imports of the inexpensive fuel last year as coal-fired power plants resumed full production, in line with rising use by Indonesia, Malaysia and other regional peers.

No breakdown on power generation is yet available for this year, but on Monday coal-fired plants accounted for about 60% of total output, according to Vietnam's power network operator.

The combination of imports and domestic output shows coal supply exceeded 8 million metric tons per month in the usually quieter January-February period, nearly 9% higher than the monthly average over the last two years.

KEEPING THE LIGHTS ON

Vietnam, which is among the world's top 20 coal users by volume, wants to cut its reliance on the fuel but still expects peak use will this decade.

As plans to boost renewable energy and gas face delays, the government wants to complete by June a transmission line to transfer electricity from the country's centre to its industrialised north. That is where heat-induced blackouts occurred last year and the El Nino weather pattern raises the risk of them this year.

The government is also working on new rules to allow factories to directly purchase power from producers.

Foreign investors, on which Vietnam's economy is highly reliant, are demanding quick action.

Semiconductor companies are delaying investment decisions because of power supply risks, the South Korean chamber of commerce in Vietnam said in a paper published last week.

In a separate paper last week, the American Chamber of Commerce asked the Vietnamese government to ease approval of energy projects to meet increasing power demand.

Otherwise, attracting high-tech manufacturing and other key goals "will be difficult to reach," the U.S. business group said.

Vietnam coal demand https://reut.rs/3TzbCL6

(Reporting by Francesco Guarascio and Khanh Vu; Additional reporting by Sudarshan Varadhan in Singapore; Editing by Jamie Freed)

((Francesco.Guarascio@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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