Vietnam’s seaborne thermal coal traders are optimistic the country’s fossil fuel consumption will continue to rise through 2021 amid increasing demand for electricity production at the lowest cost, despite the funding and regulatory challenges for new coal-fired power plants.
A new law on public-private partnerships that comes into effect in 2021 creates new hurdles for foreign coal investors that fail to conclude build-operate-transfer contracts and government guarantee and undertaking agreements before the end of 2020, according to analyst Thu Vu from the Institute for Energy Economics and Financial Analysis (IEEFA).
Four of the 15 coal power projects currently in the pipeline in Vietnam — Nam Dinh 1, Vung Ang 2, Vinh Tan 3 and Song Hau 2 — have yet to reach the commissioning phase, and with their contractual agreements still pending official sign-off, they could be at risk of being called off due to the new law, according to Vu.
A coal producer in Indonesia noted that it was already not easy to conclude thermal coal trades to Vietnam unless it involved a strategic project with government involvement.
“The rate of the growth in coal consumption may slow down in Vietnam, but the overall volume will not dip,” he said.
Southeast Asia’s thermal coal imports are expected to rise 29% to 128 million mt in 2020 from realized imports of 99 million mt in 2019, according to S&P Global Platts Analytics. Imports to Vietnam are expected to comprise 55 million mt of the total, up 22% from 45 million mt in 2019, and increase further to 55.2 million mt in 2021, it added.
Vietnam received 45% of Southeast Asia’s thermal coal imports in 2019 and with more coal-fired power plant projects in the pipeline, its low domestic coal production will continue to make it reliant on imports.
