Vietnam seeks coal from South Africa, Australia amid shortage for summer demand

Vietnam is looking to procure thermal coal from South Africa and Australia amid a shortage of the fuel for peak summer demand, according to the Ministry of Industry and Trade, as lower-than-expected domestic production and high import prices led to tight supply.

Vietnam has been slower in its procurement this year as the war in Ukraine disrupted trade flows, causing supply tightness and a sharp jump in prices across the world.

Federal trade minister Nguyen Hong Dien in a meeting April 2 asked the South African ambassador to Vietnam, Mpetjane Kgaogelo Lekgoro, to connect the three major state-run coal companies Vinacomin, Northeast Corp., and EVN with suppliers for procurement in April and May, the ministry said in a statement.

The statement also said that Dien spoke with Robyn Mudie, the Australian ambassador to Vietnam, for additional tonnage in April.

According to data from Vietnam Customs, the Southeast Asia nation did not import any coal from South Africa in 2021, while it imported 15.6 million mt of coal from Australia last year, down 23.15% from 2020.

EVN said in a statement in March that Vietnam is expected to face a power shortage in April and May due to fuel shortages in the country, S&P Global Commodity Insights reported March 31.

Following complaints from power producers about supply shortages, the trade ministry directed Vinacomin and Northeast Corp. to ensure sufficient supplies to utilities.

Supply tightness

Market sources said Vietnamese buyers were looking for coal with maximum of 20% volatile matter but the supply of that is already limited.

"They have been trying to buy for a while now but the supply of low-VM Australian coal is limited," an Australia-based trader said.

Even though Vietnamese demand for Australian coal was firm, a deal may only materialize for one or two cargoes, market participants said.

A South Korea-based trader, in charge of markets in Vietnam and Thailand, said the actual requirement may be small as the price is still too high for them. Vietnamese buyers typically purchase Supramaxes, the source said.

The Newcastle 5,500 kcal/kg NAR price was assessed at $190/mt FOB on April 1, rising 83.5% since Dec. 31, according S&P Global Commodity Insights data. The Richards Bay 5,500 kcal/kg NAR coal price was assessed at $223.20/mt FOB April 1, an increase of 107.7% since the start of 2022.