However, the price hike causes many difficulties for big consumers like fertiliser, cement and paper.

In particular, the price of lump coal sold to the nitrogenous fertiliser production was raised by 30 percent, urea fertiliser production up 25 percent and that of coal dust to cement and paper production also increased by 25 percent. Till Q4 of 2009, the coal selling price to these consumers will be hiked once more time to ensure the level lower maximum 10 percent than export price. Only the electricity sector will continue to enjoy the preferential selling price (lower 38 percent compared with the final production price) before the coal price will be adjusted according to market price in 2010.

However, as estimated, this increase will increase production costs of fertiliser, cement and paper. Due to this, these sectors could fall in dilemma because the product selling prices will be hard to increase correspondingly.

At this time, the domestic prices of fertiliser are tending to decrease because of the difference in supply and demand. Northern provinces and Mekong Delta are harvesting the summer-autumn crop so their demand for fertiliser is not high. In addition, the prolonged disasters made Central and Highland provinces spend much time to restore life and production. Thus, in short term, the demand of fertiliser in the market will decline deeper.

Hoang Manh Tien, from Vinachem's Planning and Business Commission said that the fertiliser producers under Vinachem since the year early have not yet increased production capacity because of the stockpiled volume of nearly 600,000 tonnes and high production costs whereas the purchasing power is slowing down. Along with fake and less qualified fertiliser products, to date business efficiency of these fertiliser producers has to suffer negative affects.

Similarly, the paper sector managers also have big headache with the problem of blending the spending-turnover as the coal price rises. Vu Ngoc Bao, general secretary of Vietnam Paper and Pulp Association (VPPA) said that 25-30 percent is too high increase, which not only influences strongly to cost estimation and product price but also makes halt the production process.

The cement industry does not how to manage with the surged coal prices. As estimated, with the new coal price, each tonne of clinker will be offset extra 28,000 dong and cement 23,000 dong/tonne. Meanwhile, increasing cement prices at this time is unfeasible. Le Van Chung, general director of Vietnam Cement Corp said that the finance ministry's decision allowing Vinacomin to hike coal prices has pushed cement industry and other sectors to the difficult situation.

Thoi Bao Kinh Te Vietnam - October 14, 2009