World Coal Market Trends in the Coming Time

With the integration, TKV has no other choice but to take the right steps and change to adapt to new conditions.

2. World coal market trends in the coming time

In the next few years, Vietnam will continue to rank first or second in the world in exporting Anthracite coal, with a supply of about 4 million tons/year to the world, accounting for 25-30% of the total volume of Anthracite coal exported to the world market.

In 2007 and the next few years, China will close 25 coal mines with an average output of about 25 million tons of coal. Currently, the total loss of 8 coal mines in China alone is up to 1.9 billion yuan, accounting for about 39.8% of the total loss of the entire coal industry. The total volume of coal exported by China in 2005 was only 38-40 million tons of all kinds of coal, of which Anthracite coal only accounted for 2.5-3.5 million tons. This is a good opportunity for Vietnam to export Anthracite coal.

Mr. Colin Gubbins - Director of consulting firm The McCloskey Group (TMG) said that the world coal market will continue to have a stable price trend due to the tight supply of coal in China while the demand in India and South Korea is still increasing strongly. Kaz Tanaka, Deputy General Director of PT Arutmin Indonesia, said that the coal supply in the Asian market is currently tight because many coal ships are still waiting to load at Australian ports. Mr. Gubbins predicted that the coal demand in China and India could increase by 47.6% and 17% respectively this year.

Along with Australia, Indonesia is currently one of the world's largest coal exporters, and will continue to dominate the Asian coal market at least until 2020, despite the government's policy of increasing coal supply for the domestic market. Indonesia's coal production is expected to increase from 193 million tons in 2006 to 370 million tons in 2025. However, as domestic consumption is likely to increase sharply, the country's coal exports are forecast to

increased only slightly from 148 million tons last year to 150 million tons in 2009 and will remain stable at this level until 2025. According to Mr. Gubbins, the fact that China, one of the world's leading coal producers, will continue to reduce coal exports is one of the important factors contributing to strengthening the position of Indonesia (with reserves of about 63 billion tons) as the largest coal exporter in Asia. In fact, China has increased coal imports to supplement the domestic supply shortage after the country closed many coal mines, and Vietnam's coal exports have decreased.

. Our third largest competitor in coal supply is South Africa. It is predicted that with the stability of this region, South Africa will continue to increase the volume of Anthracite exported and is estimated to account for 20-22% of the total volume of Anthracite exported worldwide.

Regarding the coal import market, with the rapid economic recovery after the regional crisis, Japan will continue to be the world's largest importer of anthracite coal. Next is France with a proportion of about 16 - 20% of the volume of imported anthracite coal and will remain at this level in the next few years. Some countries such as the Philippines, South Korea, Bulgaria... still import anthracite coal with a volume similar to previous years. In 2007, India's coal imports are expected to increase nearly 6 times to 29 million tons, compared to 5 million tons in 2006; the inauguration of new power plants in South Korea will also increase the country's coal import demand to 64 million tons. Malaysia also increased the amount of imported coal to 14 million tons, compared to 1.5 million tons in 2006. Thus, the world market for import and export of Anthracite coal in the coming time will be relatively stable and tend to increase, this can be considered a good opportunity for Vietnam National Coal - Mineral Industries Group to promote coal export activities.

II. DEVELOPMENT ORIENTATION OF TKV IN THE COMING TIME

1. Key challenges for the coal industry in the coming time

Firstly , domestic coal demand is increasing while the coal industry's ability to increase output is limited:

Table 15: Estimated domestic coal consumption demand in the coming time


Unit: Million tons


The indicators

2006

2010

2015

2020

2025

Coal for electricity consumption

5.3

11.9

23.9

39.1

76.3

Coal for cement

3.6

5.3

6.4

7.1

7.4

Coal for other consumption sectors

9.6

12.5

18.5

24.5

29.0

Add domestic coal demand

18.5

29-32

47-50

69-72

112-115

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World Coal Market Trends in the Coming Time


The indicators

2006

2010

2015

2020

2025

Domestic coal demand

18.45-18.75

29.4-31.8

47.4-50.7

71.5-75.5

112.3-118

Commercial coal can be produced

35.1

40.3-44.2

43.4-49.8

49.6-57.3

51.8-60.3

Import of coal for metallurgy

0.151-0.205

1.33-3.05

4.16-6.11

6.8-7.6

7.8-8.9

Import coal for electricity

Not yet

Not yet

1.87-0.78

16.2-13.9

53.1-50.9

Source: Journal of Mining Science and Technology, No. 3/2007, page 15


Second, coal resources in general and mining conditions in particular are increasingly difficult and complicated, reflected in the following aspects: Open-pit mines are getting deeper and deeper, leading to the need to solve problems of mine bank stability, drainage, waste disposal, transport routes, mine gas issues, hydrogeology, etc. At the same time, coal resources that have been explored and verified and have favorable mining conditions are gradually depleted, and part of the coal reserves located deep underground must be put into exploitation.

far from or located below areas requiring strict protection of structures or surface structures.

Third, ensuring labor safety and environmental protection during the mining process requires more and more strictness, especially the protection of the world natural heritage Ha Long Bay. Using coal in the traditional way still causes pollution, low efficiency while coal processing technology is almost undeveloped.

Fourth, increasing output requires high investment capital while the Group's own capital is limited and domestic coal prices are still lower than cost; since 2007, they have begun to be adjusted according to market prices.

Fifth , the coal industry will also face difficulties as a country that has long exported coal will soon have to import coal. In particular, coal-using enterprises will have to face the use of coal at market prices instead of the habit of using low prices for many years.

In short, the above challenges are multi-dimensional and multi-faceted for the group. Our country's "black gold" source is limited, which should be a valuable fuel source to serve the needs of the national economic sectors, but due to low domestic coal prices, a part must be exported to ensure financial balance for the coal industry; the profit earned from coal exports should be used to invest in continuing to search for and explore resources, expand production, ensure labor safety, protect the environment and develop human resources for sustainable development of the coal industry, but it is used to compensate for losses for some sectors using domestic coal. Therefore, appropriate solutions are what the Vietnam National Coal - Mineral Industries Group as well as the entire coal industry really need at this time.

2. Development perspectives and sustainable development goals

2.1 Development perspective

The coal industry has put forth the following development motto: "Developing the coal industry sustainably according to the goals of increasing output to maximally meet the needs of the people."

economy, in harmony with the socio-economic development of the community, environmentally friendly and constantly improving the material and spiritual life of workers".

Based on the above viewpoint, the Group's development motto is:


- Strengthen innovation and modernization of technology and equipment in all stages of coal production and processing towards cleaner production and ensuring safety for workers.

- Increasing coal production must go hand in hand with maximizing resource recovery coefficient and protecting the environment during coal production.

- Using coal reasonably and economically, combined with increasing coal processing to diversify products, create clean products, and increase the value and use value of coal.

- Develop the Group on the basis of maximizing internal resources combined with increasing investment appeals and capital sources from abroad.

2.2 Development goals

Developing the coal industry into a modern, highly efficient economic and technical sector, in harmony with the socio-economic development of the community and environmentally friendly on the basis of enhancing deep processing of coal products, developing multi-sector business, promoting innovation and modernization of technology, developing human resources, ensuring labor safety and environmental protection to meet the highest level of coal demand of the economy, contributing to ensuring national energy security. Specifically as follows:

a. On coal development


Firstly, step up the search, exploration, upgrading and increasing of resources. Specifically: By 2010, complete exploration to determine the part of resources and coal reserves below -300m in Quang Ninh coal basin; at the same time, conduct exploration

Carefully explore the Red River Delta coal basin. By 2015 - 2020, the exploration of the Red River Delta coal basin will be completed. In addition, the coal loss index in mining must be significantly reduced compared to present.

Second, increase coal output in accordance with the coal demand of the economy, the sustainable development of each coal enterprise on the basis of ensuring socio-economic efficiency and financial balance of the coal industry.

Table 16: TKV's commercial coal output target by 2025


Unit: Million tons


Year

2007

2008

2009

2010

2015

2020

2025

Target

37 - 40

40 - 42

42 - 44

44 - 47

55 - 60

65 - 70

75 – 80

Source: Vietnam Coal and Minerals Magazine, No. 6/2007, page 9


With the goal of limiting the amount of exported coal and ensuring national energy security, the Ministry of Industry also proposed a "roadmap" for coal production and export in the period 2007 - 2010. Accordingly, in 2007, the entire industry will produce 37 million tons of clean coal, of which TKV will produce 36 million tons and export no more than 17 million tons. In 2008, this figure was 38 million tons, of which TKV will produce 37 million tons and export no more than 17 million tons. The amount of coal exported by TKV in 2009 was also proposed to be no more than 14 million tons out of the total output of 38 million tons produced by TKV. And by 2010, the amount of coal exported by TKV was proposed to be 12 million tons out of the total output of 40 million tons produced by TKV4 .

Third, accelerate technology research and implement coal processing projects in the direction of diversifying products, creating clean, environmentally friendly products. Strive for the coal processing industry to develop widely after 2020, partially replacing gasoline and oil and accounting for a significant proportion of the added value of the coal industry.


4 According to http://www.vinastock.com.vn/index/news.asp?id=2210

Fourth, continuously improve business efficiency based on strict cost management, economical use of materials and energy, and increased labor productivity through innovation, technological modernization, and widespread application of technical advances.

b. On harmonious development with the community


TKV aims to contribute to socio-economic development, maintain national defense, security, and social order and safety in coal areas; Develop harmoniously with partners for the purpose of "win-win"; Significantly improve the material, cultural and spiritual life of workers in the industry. Strive for an average annual income increase higher than the growth rate of the economy; Finally, strengthen the expansion of grassroots democracy in enterprises, thereby maximizing the intelligence and creativity of workers to strongly promote the cause of innovation and modernization of the coal industry as well as the Group.

c. On labor safety and environmental protection


Regarding labor safety: the Group's goal is to persistently strive to achieve the goal of "Zero Accidents".

Regarding the environment: The Group implements a strategy to protect the green - clean - beautiful environment with the following goals: By 2010, halt the environmental degradation in mining areas; By 2015, fundamentally improve key environmental indicators in sensitive areas; By 2025, fully meet environmental standards in mining areas.

3. The Group's strategic development orientation to 2025 and vision to 2050

Vietnam National Coal - Mineral Industries Group has drafted and built its Development Strategy, including development strategy, general policy and action motto to improve the production efficiency of the company.

parent company and subsidiaries. TKV clearly identifies 3 stages of the Development Strategy as follows 5 :

* Early period: Develop in breadth, increase scale, establish market share, participate in new business lines. During this period, TKV took the coal industry as the foundation, considered coal mining as the core task and used resources from coal to develop other business lines (such as minerals, electricity, mechanics, cement, industrial explosives, etc.). Establish market share for the fields of services, tourism, trade, infrastructure, capital business, money business, labor export, international cooperation, etc.

* Phase two: In-depth development of established industries. Especially perfecting the technologies of mining, selecting, smelting and deep processing of ores. Expanding the market share of industries other than coal. Developing metallurgy industries (ferrous and black), developing coal chemistry industry.

* Period three: Continue to develop in depth the industries. Move towards establishing a multi-industry corporation (finance, industry, services). Focus on mining and metallurgy. Prioritize the development of service, finance, credit, banking, securities, insurance industries, and regularly and effectively carry out business operations.

Specifically, the basic orientations of the development strategy are:


3.1 About the market

The Group's orientation is to accept maximum integration and marketization; Satisfy domestic needs with adjustments, promote import and export according to specific efficiency criteria; Maintain balance between markets to avoid risks; Participate in new existing markets; Create new markets for new mineral products.


5 According to Mining Industry Magazine, No. 4/2006, page 4

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