Home/News/Soaring energy prices put burden on businesses

Soaring energy prices put burden on businesses

Update: March, 17/2022 - 08:32

Coal mining dumps of Cửa Ông Coal Selection Company, a member of Việt Nam National Coal-Mineral Industries Holding Corporation Limited. Việt Nam's imported coal output accounts for about 20-25 per cent of coal supplied to power plants annually. —VNA/VNS Photo Minh Đức

HÀ NỘI — Skyrocketing prices of petrol and coal in recent days have put great pressure on businesses whose inputs are mainly these products.

Along with the price of oil, the price of gas in the global market is increasing rapidly. For the first time in history, the price of European gas has reached US$3,600 per 1,000cu.m, according to data from the ICE Commodity Exchange in London, UK, on March 7, 2022. The price of gas futures for April delivery at the TTF hub in the Netherlands also increased to $3,639.1 per 1,000cu.m.

According to SSI Research, for companies using oil and gas as input materials, an increase in oil and gas prices will increase product costs. Gas-fired power plants are less competitive and the current situation also negatively affects the share of output offered in the power generation market.

The profit margin of enterprises may narrow if the cost of gas does not decrease. For example, at Nhơn Trạch 2 Petroleum Power Joint Stock Company (NT2), although in 2021, net revenue reached VNĐ5.47 trillion ($239 million), a slight increase compared to the previous year, but this growth rate was slower than the increase in cost price (gas price), so gross profit margin decreased by 24 per cent in the period. As a result, the company reported profit after tax of VNĐ534 billion, down about 15 per cent compared to 2020.

Not only oil prices, gas and coal prices on the world market also increased sharply due to the influence of the conflict between Russia and Ukraine. Russia is an important coal exporter in the world, thus when the supply of coal and oil from Russia is blocked by sanctions from the US and EU, while demand increases, pressure rises on oil and coal prices.

On March 3, 2022, the FOB Newcastle price for 5,500 kcal/kg NAR thermalcoal with 20-per cent ash, according to FOB Newcastle, reached $205.25 per tonne, up $25.65 per tonne compared to the previous session.

Indonesia's coal 5,900 GAR was quoted by S&P Global at $200 per tonne in the same session, up $45.1 per tonne, while thermal coal 5,750 NAR in Northeast Asia increased by $28.23 per tonne to $248.63 per tonne.

Việt Nam's imported coal output accounts for about 20-25 per cent of coal supplied to coal power plants annually. Therefore, coal price fluctuations will greatly affect domestic coal power plants.

Power Generation Corporation 1 (EVNGENCO1) said that coal supply in the first two months of the year encountered some difficulties, mainly due to the high prices of coal. The corporation has worked with major coal suppliers to find solutions to supplement coal sources to ensure enough coal for operation and closely follow the actual situation to develop an appropriate operating plan.

At the conference to review the work in 2021 and implement the 2022 plan of Power Generation Corporation 3 (EVNGENCO3) under Vietnam Electricity (EVN), Chairman of the Board of Directors of EVN Dương Quang Thành asked the business to proactively take measures to ensure coal sources for power production in the current situation.

In 2021, coal prices saw continuous surges, causing the gross profits of coal-fired power enterprises to drop sharply. The gross profit margin of Hải Phòng Thermal Power Joint Stock Company (HND) was only 7.1 per cent, down sharply from 17.5 per cent in 2020. Meanwhile, Phả Lại Thermal Power Joint Stock Company (PPC) suffered a gross loss of VNĐ112.3 billion.

The sharp increase in input costs can be seen as a double difficulty for coal power enterprises when international organisations no longer support loans to develop coal power projects due to concerns about environmental pollution. This will hinder businesses that are planning to invest in new power plant projects.

Difficult transport

Crude oil price remains at nearly $110 per barrel and is forecast to stay at a high level as the energy demand of the global economy continues to increase.

In the domestic market, the inter-Ministry of Finance-Industry and Trade has adjusted petrol prices from March 11, 2022 with an increase of nearly VNĐ3,000 per litre of petrol and nearly VNĐ4,000 per litre for kerosene and oil diesel. Accordingly, the price of RON 95 petrol has approached VNĐ30,000 per litre, while the price of 0.05S diesel oil is VNĐ25,268 per litre.

According to HCM City Goods Transport Association, the price of petrol has soared to the highest level in the past seven years and may increase further, causing transportation enterprises to face many difficulties. Fuel costs are accounting for about 35-40 per cent for container trucks and heavy trucks; and other vehicles account for about 25 per cent on average. Businesses also have to pay many other costs such as wharf, road maintenance and BOT fees.

Many businesses have overcome the damage caused by COVID-19 that has lasted for the past two years, and the whole industry now continued to face difficulties from the increase in petrol prices.

Hoàng Hà Joint Stock Company (HHG) said that the COVID-19 pandemic has severely affected the business's operations. From August to October 2021, all intercity vehicles of the company must stop working.

Last year, HHG recorded net revenue of VNĐ94.3 billion, down 16 per cent compared to the previous year; and a post-tax loss of VNĐ68.6 billion. HHG has suffered continuous losses since the third quarter of 2019.

Ánh Dương Group Joint Stock Company-Vinasun Taxi (VNS) recorded net revenue in 2021 down 52 per cent compared to 2020, to VNĐ485 billion and a net loss of nearly VNĐ277.6 billion, in 2020 the loss was VNĐ210.6 billion.

According to Tạ Long Hỷ, Deputy General Director of VNS, from the beginning of 2022, the price of petrol has increased sharply, causing taxi businesses to choose between increasing fares or accepting losses. Vinasun had to increase freight rates to solve the problem.  VNS

Source: vietnamnews

Please upgrade IE 8+, Download here
123movies