Electricity hike hits industry hard
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Vietnamese manufacturers are set to increase their selling prices following the 8.36 per cent hike in electricity price that launched from March 20.
Việt Nam Cement Industry Corporation (VICEM) Bút Sơn announced it would increase the price of its cement by VNĐ30,000 (US$1.29) per tonne immediately after the power price increase.
Đỗ Tiến Trinh, VICEM Bút Sơn’s general director, said that in addition to the electricity tariff hike of 8.36 per cent, the price of coal sold to cement producers also increased by 2.3 to 5.8 per cent depending on the kind of coals.
The coal price increase came because electricity accounts for 10 per cent of production cost. In addition, the Việt Nam National Coal and Minerals Industry Holding Group (Vinacomin) has not provided enough coal to cement producers, making them import the product at high prices.
Trinh said the firm could not afford to offset the rise in input costs and had to increase retail prices to ensure sustainable production.
VICEM Tam Điệp Company also had the same increase in the selling price.
According to Phạm Văn Minh, the company’s general director, no business wants to increase retail prices, but electricity and coal make up a big portion of input material costs for cement production.
Công Thanh Cement Joint Stock Company in the central region did not raise its retail prices but is charging distributors VNĐ30,000 more per tonne.
Nguyễn Quang Cung, chairman of Việt Nam Cement Association said cement producers were not surprised by the power tariff hike and had been preparing for the change.
Its calculations showed if the electricity price was increased by 8.36 per cent, cement production cost would rise by VNĐ14,000 to VNĐ15,000 per tonne.
“The coal price increase came because electricity accounts for 10 per cent of production cost.”
Steel producers also said they would increase their selling prices.
SSE Steel Company said it doubled its steel selling price to VNĐ200,000 per tonne, while Thái Nguyên Steel and Iron Corporation (Tisco) increased its selling prices by VNĐ150,000 to VNĐ200,000 per tonnes.
The Việt Nam Steel Association said it was unavoidable for steel producers to raise their prices as power accounted for 8 to 9 per cent of total production costs. In addition, the import prices of iron ore and steel billets were also rising this year, affecting steel production costs.
Nguyễn Anh Tuấn, head of the Electricity Regulatory Authority of Việt Nam (ERAV) under the Ministry of Industry and Trade (MoIT) told a press meeting last week that there were about 1.4 million manufacturing businesses in Việt Nam who spend on average VNĐ12.39 million per month on electricity. The average increase in their power bills would be VNĐ870,000 a month.
While electricity prices have almost doubled in the last decade, the MoIT said Việt Nam’s electricity prices were 8.1 per cent lower than that of China and India, 18 per cent lower than Laos and 26.5 per cent lower than Indonesia. Even with the latest increase, the prices would only be on par with China and India.
“Việt Nam’s electricity prices are lower than other countries. It is the reason that foreign investors are not interested in investing in electricity projects in the country,” said deputy minister Hoàng Quốc Vượng.
However, chief economist of the Bank for Investment and Development of Việt Nam (BIDV) Cấn Văn Lực suggested the Government needs to eliminate cross-subsidising mechanisms for units using electricity.
At present, industrial sectors consuming large amounts of electricity, accounting for 55 per cent of electricity density, such as cement, iron and steel, are being compensated for electricity prices and only subject to the lowest price of 6.8 cents per kWh. Meanwhile, electricity costs households 8.7 cents per kWh.
“Currently, consumers using electricity for domestic use as well as service enterprises are compensating a certain amount for industrial production enterprises – that is unfair. When there is fairness, people and businesses will agree and are willing to pay more reasonable electricity prices,” Lực said.
Read more at https://vietnamnews.vn/economy/507842/electricity-hike-hits-industry-hard.html#CEgTqP3b4CrxPzgm.99
Questions & Answers
Q.Which specific industries are mentioned as increasing their selling prices due to the electricity hike?
Which specific industries are mentioned as increasing their selling prices due to the electricity hike?
The article states that Vietnamese manufacturers are increasing selling prices. Specifically, cement producers like VICEM Bút Sơn and VICEM Tam Điệp, and steel producers such as SSE Steel and Thái Nguyên Steel and Iron Corporation are raising prices.
Q.What other input cost increases are affecting cement producers, besides the electricity tariff hike?
What other input cost increases are affecting cement producers, besides the electricity tariff hike?
Cement producers are also facing an increase in the price of coal, which has risen by 2.3 to 5.8 per cent depending on the type. Also, they are importing coal at high prices due to insufficient supply from Vinacomin.
Q.How do Việt Nam's electricity prices compare to those in other Asian countries even after this recent increase?
How do Việt Nam's electricity prices compare to those in other Asian countries even after this recent increase?
After the increase, Việt Nam's electricity prices are expected to be on par with China and India. Before the hike, they were 8.1 per cent lower than China and India, 18 per cent lower than Laos, and 26.5 per cent lower than Indonesia.
Q.What issue does the chief economist of BIDV highlight regarding current electricity pricing mechanisms?
What issue does the chief economist of BIDV highlight regarding current electricity pricing mechanisms?
The chief economist suggests eliminating cross-subsidising mechanisms. Industrial sectors using large amounts of electricity pay a lower rate (6.8 cents per kWh) compared to households (8.7 cents per kWh), which he considers unfair.
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